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Too Many Managers: The Strategic Use of Titles to Avoid Overtime Payments

NBER –  Too Many Managers: The Strategic Use of Titles to Avoid Overtime Payments – Lauren Cohen, Umit Gurun & N. Bugra Ozel Working Paper 30826. DOI 10.3386/w30826. Issue Date January 2023 – “We find widespread evidence of firms appearing to avoid paying overtime wages by exploiting a federal law that allows them to do so for employees termed as “managers” and paid a salary above a pre-defined dollar threshold. We show that listings for salaried positions with managerial titles exhibit an almost five-fold increase around the federal regulatory threshold, including the listing of managerial positions such as “Directors of First Impression,” whose jobs are otherwise equivalent to non-managerial employees (in this case, a front desk assistant). Overtime avoidance is more pronounced when firms have stronger bargaining power and employees have weaker rights. Moreover, it is more pronounced for firms with financial constraints and when there are weaker labor outside options in the region. We find stronger results for occupations in low-wage industries that are penalized more often for overtime violations. Our results suggest broad usage of overtime avoidance using job titles across locations and over time, persisting through the present day. Moreover, the wages avoided are substantial – we estimate that firms avoid roughly 13.5% in overtime expenses for each strategic “manager” hired during our sample period.”

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