Too Many Managers: The Strategic Use of Titles to Avoid Overtime Payments
We find widespread evidence of firms appearing to avoid paying overtime wages by exploiting a federal law that allows them to do so for employees termed as “managers” and paid a salary above a pre-defined dollar threshold. We show that listings for salaried positions with managerial titles exhibit an almost five-fold increase around the federal regulatory threshold, including the listing of managerial positions such as “Directors of First Impression,” whose jobs are otherwise equivalent to non-managerial employees (in this case, a front desk assistant). 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 and when there are weaker labor outside options in the region. We find stronger results for occupations in low-wage industries that are penalized more often for overtime violations. Our results suggest broad usage of overtime avoidance using job titles across locations and over time, persisting 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.
We are grateful for comments from Jim Albertus, Ilona Babenko (Discussant), Nina Baranchuk, Lucian Bebchuk, Alma Cohen, Matt Denes, Zoran Filipovic (Discussant), John Griffin, Mark Huson (Discussant), Oguzhan Karakas, Lars-Alexander Kuehn, Bryan Routledge, Chester Spatt, Jin Xu (Discussant), and seminar participants at The Wharton School at University of Pennsylvania, Harvard Law School, Carnegie Mellon University, Florida International University, University of Illinois at Urbana-Champaign, University of Miami, Georgia State University, University of St. Gallen, University of Missouri-Columbia, University of Ottawa, CUNEF/Toulouse/ESCP Paris Corporate Finance Webinar, University of Nottingham, Singapore Management University, Ozyegin University, Universidad Adolfo Ibenez, Society of Labor Economists Annual Meeting, Financial Management Association Annual Meeting, Northern Finance Association Annual Conference, Conference on Financial Economics and Accounting, Florida State University Suntrust Beach Conference. We thank Audrey Burke and Peiran Li for superb research assistance. Please send correspondence to Lauren Cohen (Harvard Business School, Baker Library 279, Soldiers Field, Boston, MA 02163, phone: 617-4953888, email: firstname.lastname@example.org), Umit G. Gurun (University of Texas at Dallas, 800 W Campbell Rd, SM 41, Richardson, TX 75080, phone: 972-8835917, email: email@example.com), Bugra Ozel (University of Texas at Dallas, 800 W Campbell Rd, SM 41, Richardson, TX 75080, phone: 972-8835910, email: firstname.lastname@example.org). The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
- Overtime wages are a core component of labor protections for workers. In Too Many Managers: The Strategic Use of Titles to Avoid...