A recent study by researchers from the University of Texas and Harvard Business School found that companies use fake or inflated manager titles to avoid paying employees in full for overtime. Also known as “title-fudging,” this tactic has been commonly used to keep labor costs down. As a result, employees with inflated titles receive 13% less pay than they may have otherwise gotten. According to the National Bureau of Economic Research (NBER), this tactic costs workers $4 billion in overtime payments.
The study’s author Umit Gurun and coauthor N. Bugra Ozel have found past examples where large corporations such as Bank of America, Family Dollar, and JPMorgan Chase & Co were sued for wage theft. Wage theft occurs when employers do not pay their employees according to the law. Examples may include paying under minimum wage, not allowing workers to take meal and rest breaks, requiring off-the-clock work, taking tips, and not paying employees overtime.
How Companies Use Titles to Avoid Paying Overtime
Companies are generally required to pay workers one-and-a-half times their hourly rate when they work over 40 hours in a week. However, there is an exemption. Salaried managers receive the same amount of pay per week as long as their wage is above a certain minimum amount.
Gurun and Ozel studied the cutoff to qualify for overtime and found the number to be $455 a week, equivalent to an annual $23,660 salary. Meaning when a manager’s salary was at least $23,660 or $455 a week, they were no longer eligible to receive overtime pay. The authors analyzed a database of job postings from the labor analytics firm Burning Glass Technologies between 2010 and 2018—and discovered that there was a spike in fake-sounding manager titles at the legal threshold of $455 a week. This indicated that companies were putting workers on salaries to avoid overtime payment laws.
Employees have expressed outrage over inflated titles such as “Director of First Impressions”, which removed paid overtime from their compensation despite being similar in responsibility to non-managerial positions of an hourly front desk assistant. Other employees complained that their employers failed to pay them overtime.
While this is a pattern in multiple states, the study found inflated manager titles to be more common in states with weaker labor laws, lower union membership, and higher unemployment.
Even in 2019 when the Department of Labor won $226 million in wages for cheated workers, companies still saved about 18 times that amount by calling individual contributors “managers.”
What to Do If Your Employer Has Violated Wage or Hour Laws
The Fair Labor Standards Act (FLSA) states that employees who are non-exempt must receive overtime pay for working over 40 hours a week. If you believe your employer has violated wage or hour laws, seek help by filing a claim with the U.S. Department of Labor Wage and Hour Division and consulting with an attorney. Before taking action, be sure to collect documentation through pay stubs, timecard copies, emails, and other forms of evidence that indicate your employer is in violation of state or federal laws.
Our wage and hour dispute attorneys at Shellist Lazarz Slobin can review your case to discuss available options and potentially help you recover lost wages. Don’t hesitate to reach out to us if you have questions about wage and hour violations.
Call us today at (713) 352-3433 or set up a consultation with us through our online form.