Companies skirt overtime pay with dubious management titles

Keywords Compensation / overtime

Companies avoid paying about $4 billion in overtime wages by inventing dubious titles for U.S. employees such as “director of first impressions” and “lead shower door installer,” according to new research on a common practice that skirts federal labor law.

The practice, often deployed by retail and restaurant companies, takes advantage of the Fair Labor Standards Act, which exempts firms from paying overtime wages if the employee is a manager and gets paid a salary above a certain threshold.

From 2010 to 2018, the researchers found a 485% increase in job postings for salaried employees in dodgy managerial roles where duties rarely included any actual management. Companies avoided paying overtime on more than 151 million work hours via this practice, the study found, costing workers an estimated $4 billion in pay.

Other suspect job titles identified by researchers included carpet shampoo manager, price scanning coordinator and guest experience leader. Even though companies such as Walmart and JPMorgan Chase have paid millions of dollars in fines and settlements over the years for violating the federal overtime rules, the researchers said the practice remains commonplace as the penalties pale in comparison to what firms can save by deliberately misclassifying staffers.

Companies continue to dodge overtime pay despite “full knowledge of potential litigation,” said the researchers, professors at Harvard Business School and the University of Texas.

The study was released by the National Bureau of Economic Research, an organization whose largest funding sources include the Social Security Administration and the Alfred P. Sloan Foundation. NBER says it doesn’t make policy recommendations or carry out advocacy on the basis of research findings.

Wage theft ranks among the top corporate violations after workplace safety infractions, according to the study.

Family Dollar, now part of Dollar Tree, had to pay more than $30 million after a 2006 ruling in Alabama for denying overtime pay to 1,424 store managers, and later faced similar charges in Colorado and New York. But it doesn’t just happen at lower-wage industries. Facebook, now called Meta, and Goldman Sachs Group have also been accused of misclassifying workers to avoid paying them overtime.

The practice was more common in states where employees have fewer protections, and when employers had more bargaining power and faced less competition for workers, the study found. When workers were better educated, it happened less.

There was no similar spike in the use of dodgy titles at the same firms for their hourly employees, who must be paid overtime under the FLSA. The threshold for overtime pay used in the research was $455 a week, or $23,660 a year, which was increased to $684 a week in 2020.

“The findings are the tip of the iceberg,” the researchers said. “Overtime avoidance can occur at other salary levels, too, and in different ways.”

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4 thoughts on “Companies skirt overtime pay with dubious management titles

  1. Wage Theft is incredibly prevalent and costly. Strong clear worker protections would provide guidance for companies to treat employees with respect, which would provide more incentive for people to show up and work.

    “Why don’t people work anymore?” – often it’s because the boss is a crook

    1. Bingo. The average worker isn’t stupid. They know they’re being ripped off by their employer with low wages, overtime denial and inflexible scheduling, to name just a few of the issues. They see the quarterly reports and how much the CEO and other managers are making while their own costs keep rising beyond their means to pay. It’s no wonder so many of them have become skeptical and jaded. Sometimes it’s just not worth it.

      Capitalism needs labor, so capitalism only works if it is a fair and balanced system where employers treat their employees fairly and pay them a living wage. Absent that, you eventually see a breakdown in the system. And that’s where we are. Unless businesses change their ways or government steps in to make them change, it won’t get better.

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