More employers are using the overtime loophole to pay people less

More employers are using the overtime loophole to pay people less

More employers are using the overtime loophole to pay people less

VScongratulations on your new role as manager. But before you celebrate, you might want to ask your boss a few questions and do some quick math.

Employers are increasingly offering workers fake job promotions and creating lofty-sounding management titles to avoid overtime pay. That’s according to new research from a trio of economists from Harvard University and the University of Texas-Dallas who scoured online job postings. and compensation data from 2010 to 2019.

The same Depression-era law that established a national minimum wage and a 40-hour workweek created overtime pay regulations to discourage companies from overworking employees and encourage job creation. There is a small loophole in the Fair Labor Standards Act, however, and in its current form, the regulations allow companies to waive overtime pay for employees who are salaried executives, earning more than $455 a week (or 23 $660 per year).

Over the 10-year period, the researchers found a 485% increase in the use of misleading management titles for salaried positions with earnings only slightly above the $455 per week threshold. “Our results suggest widespread use of overtime avoidance using job titles across locations and over time, persisting to the present day,” the study concludes.

This use of misleading job titles ends up saving companies nearly 14% in overtime expenses for each so-called manager, the researchers found.

Some examples of potentially sketchy job listing language, according to the study:

  • A front desk clerk position advertised as “director of first impressions”
  • A barber position listed as a “grooming manager” role
  • An ad for a restaurant host or hostess who calls a “customer experience leader”

“We were surprised by the prevalence and magnitude of this,” says Lauren Cohen, professor of finance and innovation at Harvard Business School and co-author of the research. He says the 85-year-old law should be updated so that all employees, including managers, are eligible for overtime pay. “People should be paid for what they actually do, not who they are or what their name is,” he told TIME.

Lawsuits for alleged non-payment of overtime are quite common and occur in many industries. Cohen and his colleagues cite a 2008 class action lawsuit against Family Dollar Stores, in which 1,424 store managers alleged that they performed managerial duties only occasionally, while working 60 to 90 hours a week to perform tasks such as “stocking the shelves, managing the cash registers”. , unload trucks and clean parking lots, floors and bathrooms,” according to court documents. Ultimately, the court awarded the employees $35.6 million for their unpaid overtime.

In 2020, Facebook said it would pay $1.65 million to resolve a case in which 63 of its “customer solutions managers” alleged they had been wrongly classified as exempt from overtime pay. Staples agreed to pay $42 million in 2010 to settle a handful of lawsuits alleging the retail chain misused the “assistant store manager” title to avoid paying some employees for overtime. JPMorgan Chase agreed to pay $16.7 million in 2017 to settle a lawsuit that alleged it misclassified assistant branch managers at some of its retail banks and failed to pay them overtime wages.

Cohen and his co-authors say they’re eager to see if the trend has eased during the pandemic. Their next step will be to release a set of proposals on how to modernize the Fair Labor Standards Act. Their concern is broad: “This situation is not in the best interest of driving innovation and value creation in our economy,” says Cohen.

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