Too Many Managers: Strategic Use of Titles to Avoid Overtime Payments

Abstract

We exploit a federal law that affords firms the ability to avoid paying overtime wages when an employee is classified as a manager and paid a salary above a pre-defined dollar threshold. We show that listings for salaried managerial positions exhibit an 89% increase around the regulatory threshold, including the listing of managerial positions such as “directors of first-impression,” “lead reservationists,” and “coffee cart managers.” 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 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.