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I am not exactly sure of the specifics of how the companies work, but in general, at least where I am from, this sounds legal. Back when I worked in fast food, our franchise owner owned several locations which he established an additional company for. This allowed employees to gain more hours at a seperate location. Being owned by the same owner made it easier to work at the other locations. However, there were seperate checks, seperate w2s, seperate applications, seperate workers comp forms, etc. Different companies.