Companies Hand Out Dubious Job Titles to Avoid Paying $4 Billion in Overtime

Affected employees are being stiffed an average of $3,194 a year, or 13.5 percent of their annual pay.

Family Dollar has a history of not paying employees overtime. Scott Olson/Getty Images

It’s easy to make fun of the non-serious job titles that have proliferated across American business. There are chief fun officers, data alchemists and happiness engineers. While these titles may seem whimsical and unthreatening, new research released today (Jan. 9) by the National Bureau of Economic Research suggests a more malign intent behind many of them: to avoid paying overtime.

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Under federal law, companies are required to pay overtime to their workers unless they are exempt because their pay meets a certain threshold, and if their job duties are managerial in nature. Since companies want to avoid paying overtime, one strategy is to assign non-managers job titles that imply managerial duties, even if none exist. One company calls its front-desk receptionist a Director of First Impressions, for example.

According to researchers at Harvard and the University of Dallas, there was a 485 percent increase in these managerial titles when employee pay just reached the federal pay threshold of $455 a week that would otherwise require overtime pay during the years of the study (it has since been raised to $684 a week). For employers, it’s more cost-effective to hire workers just above the minimum salary limit and assign them a managerial title, rather than hire them below the limit and pay them required overtime, according to the paper.

Notably, the increase in bogus titles occurs only in states with the $455 threshold. In states with stronger overtime rules, the titles don’t appear with the same frequency.

Among the bogus titles the researchers found were “Guest Experience Manager” for restaurant hosts, “Grooming Manager” for barbers and “Carpet Shampoo Manager (Trainee)” for carpet cleaners.

“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 paper. The study is a working paper, which means it hasn’t yet been peer reviewed.

The researchers estimate there are roughly 73,000 employees in the U.S. who are categorized as managers but should be receiving overtime pay. They calculate companies avoid paying $4 billion annually, or about $3,194 per employee. That amounts to about 13.5 percent of those workers’ annual wages.

Refusing to pay overtime to qualified employees is a form of wage theft, and it’s a pernicious problem among retail and service employers. Family Dollar has been sued in multiple states for not paying overtime to employees it categorized as managers, despite their having few if little actual managerial responsibilities. In Colorado, for example, the company paid $2.3 million to settle a a 2012 claim brought by 488 employees, while in Alabama in 2008, the company lost a trial and was required to pay more than a thousand employees $35.6 million.

But while companies can and do face penalties for refusing to pay overtime, the researchers note it’s a fraction of what they can save by misclassifying employees.


Companies Hand Out Dubious Job Titles to Avoid Paying $4 Billion in Overtime