Getting a fancy new position at work is typically thought of as a good thing—a sign that someone is progressing in their career—but a new study shows that firms of all types and sizes are giving workers phony managerial titles in order to avoid paying them overtime in what researchers see as an exploitation of federal labor laws.
When it was enacted during the New Deal in 1938, the Fair Labor Standards Act set overtime pay rules in order to discourage overwork, encourage hiring, and let workers benefit when they logged extra hours. But it also allowed firms to avoid paying overtime to salaried managers whose pay exceeded a set threshold.
“If you are a manager and you're paid over a certain amount, in fact, that lifts the burden of firms having to pay you overtime,” said Lauren Cohen, a professor at Harvard Business School and one of the paper’s authors.
The logic at the time of the law’s creation was that managers are a special class of employee with a particular stake in the company’s future success. But today, many such workers are managers in name only, and the national threshold is only $455 a week, or under $24,000 a year. Cohen and his fellow researchers scoured job listings in the 2010s and discovered that right above that weekly $455 threshold, there was a 485 percent increase in the number of salaried positions with fancy-sounding managerial titles. “We were shocked at the magnitude,” said Cohen.
The researchers found “no such jumps” in that threshold among workers who were paid hourly and hence would still be owed overtime. Nor did the pattern persist at that particular $455 threshold in states like New York and California, which have set higher overtime thresholds.
To the researchers, it appeared that there was a systemic issue at play. Companies, it seemed, were often doling out fancy-sounding titles to salaried employees and then paying them just enough to legally shirk overtime rules. “We find widespread evidence of firms appearing to avoid paying overtime wages by exploiting a federal law,” the researchers state in their paper, which was recently published as a working paper by the National Bureau of Economic Research.
Oftentimes, the titles were clearly questionable. Directors of First Impression, for example, often had duties similar to that of a front desk assistant. The same pattern held for “Guest Experience Leaders (i.e. hosts and hostesses), Carpet Shampoo Managers (carpet cleaners), Grooming Managers (barbers), and even Coffee Cart managers (coffee attendants). There was even a title listed as Assistant Bingo Manager.
On average, the strategy appears to save companies significant amounts of money (and costs workers just as much). The researchers estimate that firms pocket 13.5 percent in overtime payments for each bullshit manager title they hand out.
The overtime-evasion trick held across industries and around the country, according to the data, but was most obvious within industries and states where workers had fewer rights and less bargaining power, as well as in low-wage industries that are more often dinged for overtime violations, like retail and food and drink services.
Still, the researchers suspect that the data is only the “tip of the iceberg” and that overtime avoidance likely occurs at other salary levels, albeit in less easily detectable ways. “It's not just one kind of firm or just some random small institutions that are doing this. These are the biggest firms that are doing this and doing this again and again,” said Cohen, who also serves as a research associate at the NBER.
The study puts hard numbers to something many workers have long suspected The discount chain Family Dollar, for example, has faced a class-action lawsuit in the past for naming store managers who allegedly spent as much as 90 hours a week “stocking shelves, running the cash registers, unloading trucks, and cleaning the parking lots, floors and bathrooms.” Similar suits have been filed against the supermarket chain Publix and the office supplies company Staples, but also against financial firms like JPMorgan Chase and technology companies like Meta (then Facebook).
In each case the central issue was the same: Companies were misclassifying employees as managers in order to avoid paying overtime.