Would you rather be a receptionist or the “Director of First Impressions” A barber or a “Grooming Manager”?
How you respond could have a substantial impact on your annual income. According to academics from the University of Texas and Harvard Business School, this is because employers habitually misrepresent workers’ titles to avoid paying them in full for extra labor.
It is no secret that businesses go to considerable efforts to reduce labor costs. The new working paper demonstrates that businesses save a total of $4 billion annually in overtime costs by just utilizing unique job titles. However, these inflated titles result in 13% less pay for employees than would otherwise be the case.
Umit Gurun, a professor of accounting and finance at the University of Texas and one of the report’s authors, stated, “If you’re relying on cheap labor — you’re a labor-intensive company and you can get away with it— this becomes a tool that you can use to lower your costs,”
Gurun stated that he conceived the idea for the National Bureau of Economic Research study while at the airport and overhearing two workers discussing a delayed flight.
“One remarked, ‘I don’t grumble since I receive overtime.’ Since the other man was a manager, he did not, “Gurun reflected. However, they were performing the same duties.
After this talk, Gurun began to encounter dozens of instances in the press. Workers have brought lawsuits against some of the United States’ major companies, including Bank of America, Family Dollar, JPMorgan Chase, Starbucks, and UPS. With the exception of occupational safety and health issues, companies are sued for pay theft more than virtually anything else.
The $15 billion issue plaguing American workplaces 01:50
Not making it through the cracks
The focus of these litigation is a peculiarity in U.S. wage law. Employers are often required to pay workers 1.5 times their hourly rate if they work more than 40 hours each week. There is, however, an exception for salaried managers, who receive the same amount of salary each week as long as they earn more than a specified minimum. During the time period investigated by the authors, the threshold for overtime eligibility was $455 per week, or $23,660 per year.
Gurun and his co-authors reviewed a database of job posts from 2010 to 2018 from the labor analytics business Burning Glass Technologies, paying special attention to those with managerial titles. They discovered that the occurrence of fake-sounding manager positions surged at the legal threshold of $455 per week — precisely the amount at which a corporation might put employees on salary and circumvent OT payment requirements.
The research stated, “There is a systematic, robust and sharp increase in firms’ use of managerial titles around the federal regulatory threshold that allows them to avoid paying for overtime,”
According to the researchers, these titles include food cart manager, price scanning coordinator, carpet shampoo manager, lead shower door installation, director of first impressions, and grooming manager.
Notably, this pattern did not occur in states with a different wage threshold for OT or with hourly-paid managerial titles, supporting the notion that corporations are engaging in this practice purposefully to avoid paying overtime. Additionally, the study discovered that inflated manager titles were more prevalent in states with weaker labor regulations, low union membership, and higher unemployment.
Workers and regulators are cognizant of these practices. Since 1940, the Department of Labor has warned that if corporations are permitted to exempt certain titles from receiving their full lawful pay, they are likely to exploit the system. One official noted, “Titles can be had cheaply,” “[I]t is not hard to call a janitor a ‘superintendent’ or a ‘superintendent of maintenance’ if some result desirable to the employer will flow therefrom.”
However, businesses continue strategic title fraud because, well, it pays. The report revealed that in 2019, when the Department of Labor won $226 million in back wages for duped workers, corporations saved about 18 times that much by labeling frontline employees performing mundane tasks as “managers,”
“The incredibly high [return on investment] on this activity of avoiding overtime wages might explain why we see firms across every industry – from Staples to JPMorgan, to Facebook, to Walmart, to Verizon, to Avis, to Lowes – engaging in this activity even up through the present day,” the paper stated.
»Companies save billions by giving false “manager” designations to employees«