Managerial workers earning more than a ridiculously low $455 a week are exempt from overtime pay if they work more than 40 hours a week—and employers are going to great lengths to exploit that fact, a new study shows. Companies are giving people what researchers call “fake-sounding” managerial titles, along with salaries just a tiny bit over $455 a week, and saying they don’t qualify for overtime.
How fake-sounding? You’re not a front desk clerk, you’re a “director of first impressions.” You’re not a barber, you’re a “grooming manager.” You’re not a carpet cleaner, you’re a “carpet shampoo manager.”
There are supposed to be multiple factors in whether someone is exempt from overtime pay. They not only have to make more than that $455 a week, they have to be doing legitimately managerial work. But what qualifies as managerial work can be hard to define, and employers seem to be using these inflated titles to prevent workers or regulators from looking at actual, detailed job duties. In a National Bureau of Economic Research (NBER) working paper using data from 2010 to 2018, Lauren Cohen, Umit Gurun, and N. Bugra Ozel offer strong evidence that this isn’t just title inflation for its own sake.
The overall effect of “managers” making just over $455 isn’t a small one. There’s “a 485% increase in the usage of managerial titles for salaried employees just above the salary threshold set in the Federal Labor Standards Act ($455/week)—allowing the firms to avoid paying overtime compensation to these workers,” and it’s costing workers around $4 billion in overtime every year.
Here’s how it goes, and how we can be pretty sure this is a real effect: The authors found that the share of workers with managerial titles spikes among those being paid just over $455 a week. People making $455 to $480 a week are more likely to have managerial titles than those making $480 to $505 or $505 to $530.
Not only that, there are five states where the overtime threshold is higher. In those states, the researchers didn’t see the same spike of managerial titles right at $455. Similarly, jobs with hourly or daily pay rather than salaries don’t show a jump in managerial titles at that significant pay level. And it also happens more in states where employers have more power and workers have less.
In other words, these authors have assembled very strong evidence that companies are cheating their workers out of overtime pay by giving them fancy, if fake-sounding, titles but the lowest possible pay. Workers should be able to challenge this, showing that their duties aren’t really managerial, and so, even at a $ 455-a-week salary, they should be eligible for overtime. But that relies on workers knowing the exact standards their duties do or don’t meet and knowing which oversight agency to contact. Employers can make a pretty good bet that they’re not going to be called on it.
As president, Barack Obama tried to double the overtime eligibility threshold from $23,660 to $47,476, but his move was predictably blocked by a right-wing judge late in 2016. The Biden administration has indicated it plans some action on this front in 2023, but the details aren’t yet public. In the meantime, this is one of several major forms of wage theft that add up to employers stealing more from their workers every year than all robberies put together.