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

We find widespread evidence of firms appearing to engage in overtime payment avoidance by exploiting a federal law that allows them to side-step doing so for “managers” who are paid above a pre-defined salary threshold. We show that listings for managerial positions just above the federal regulatory threshold exhibit an almost five-fold increase, including listings of managerial positions such as “Directors of First Impression,” whose jobs are otherwise equivalent to non-managerial employees (in this case, a front desk clerk). 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, as well as when there are weaker external local labor options. Lastly, the results are stronger in occupations with more volatility in labor demand, when there is more uncertainty in labor scheduling, and for occupations in low-wage industries that are penalized more often for overtime violations. Our results suggest a broad usage of overtime avoidance using job titles across industries, locations and over time - if anything becoming stronger 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.