Companies Are Handing Out Manager Titles to Avoid Overtime Pay

When you are assigned a new position at work, it typically means that you are progressing in your career. With this new position, you can expect to find increased responsibilities, hours, and, in most cases, pay. However, according to a new study, companies are only handing out title bumps to avoid pay bumps in their workers' paychecks– teetering on the line of what many experts claim is the exploitation of federal labor laws and wage theft.

What Are the Overtime Laws in the United States?

The Fair Labor Standards Act (FLSA) was enacted in 1938 during the New Deal and set overtime pay regulations in order to discourage companies from overworking their employees and encouraging those additional hires to cover the remaining hours not worked by their existing employees. If not, then as the FLSA states, those employees must receive overtime pay for the hours worked over forty hours in a workweek at a rate no less than time and one-half their regular pay rate. 

This, however, included all except those considered exempt employees. By today's standards, the FLSA only allows firms to avoid paying overtime pay to salaried managers whose income exceeds a certain threshold of $455/week or $23,660/year. While at the time, the idea behind this restriction was to set those employees with a manager title aside from the rest and gain them a stake in the company's future success–now things seem to be going in a different direction. 

Employees Receive Phoney Titles with Same Job Requirements

In today's working world, it would seem that the manager title only serves as a label rather than holding any real value, with many so-called "managers" making under the required threshold of $24,000 a year (changed to $684 per week or $35,568 per year in 2020). Aside from what many researchers are calling wage theft, employees with manager titles are also noticing their titles and work expectations do not line up. 

Under FLSA, those exempt employees are required to have work that primarily involves executive, administrative, or professional duties as defined by the regulations. Yet, many are finding themselves working the same extended hours, doing the same role they were before, in addition to the new, more "administrative" jobs. In some instances, companies were found to also keep their staff numbers low, taking away negotiation power and adding more pressure that would keep those workers in impossible situations when it comes to their ability to maintain their livelihood. 

As mentioned in a working paper by the National Bureau of Economic Research (NBER), their researchers found that listings for salaried positions that included managerial titles included job descriptions that were equivalent to non-managerial roles. NBER, for instance, found multiple roles labeled as "Directors of First Impression" that aligned more with that of a position for a front desk assistant. 

The research shows that companies are following the same patterns and continuing to offer more and more questionable titles, including grooming managers instead of barbers, carpet shampoo managers, in place of carpet cleaners, coffee cart managers instead of baristas or coffee attendants, and guest experience leaders vs. host or hostesses. One job post even had a title listed as an "assistant bingo manager." NBERs research shows that, for each phony manager title given, the firms are able to pocket roughly 13.5% in overtime expenses.

Recent Lawsuits All Claim the Same Issue

What these studies have shown us is that companies are continuing to trend in the direction of cutting corners when looking to pocket overtime fees or avoid paying them altogether. A lawsuit filed in 2018 by a group of Panera assistant managers in Ohio against the country's largest Panera Bread franchisee, Covelli Enterprises, alleged that they were being forced to work without overtime pay after being wrongly classified as exempt from overtime protections. The settlement stated that Covelli must pay $4.62 million into a settlement fund for members of the protected class, made up of more than 900 assistant managers. 

Panera isn't the only firm under fire. In recent years, there has been a string of lawsuits surrounding overtime pay, with well-known companies like Chipotle, Verizon, Staples, Publix, JP Morgan, Bojangles, Meta, and more mislabeling their employees. Many researchers even believe that this is only the tip of the iceberg when it comes to the measures these firms are taking to avoid overtime pay. 

The U.S. Department of Labor (DOL) is set to issue its new proposed changes to the overtime rule sometime this month. Employers can expect to see changes regarding the exempt salary threshold as well as the job's primary duties, making it more difficult for employers to classify certain employees as exempt. Until then, for more information regarding overtime pay, wage theft, or employee misclassification, you can connect with us today.