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Companies exploiting federal labor laws with titles instead of overtime pay: Study

So, are titles effective compensation?     A new study looked into this – and found it may be exploitation of federal labor laws.   Let’s quote Vice and excuse the language in advance.

But today, many such workers are managers in name only, and the national threshold is only $455 a week, or under $24,000 a year. Cohen and his fellow researchers scoured job listings in the 2010s and discovered that right above that weekly $455 threshold, there was a 485 percent increase in the number of salaried positions with fancy-sounding managerial titles. “We were shocked at the magnitude,” said Cohen.

The researchers found “no such jumps” in that threshold among workers who were paid hourly and hence would still be owed overtime. Nor did the pattern persist at that particular $455 threshold in states like New York and California, which have set higher overtime thresholds. 

To the researchers, it appeared that there was a systemic issue at play. Companies, it seemed, were often doling out fancy-sounding titles to salaried employees and then paying them just enough to legally shirk overtime rules. “We find widespread evidence of firms appearing to avoid paying overtime wages by exploiting a federal law,” the researchers state in their paper, which was recently published as a working paper by the National Bureau of Economic Research. 

On average, the strategy appears to save companies significant amounts of money (and costs workers just as much). The researchers estimate that firms pocket 13.5 percent in overtime payments for each bullshit manager title they hand out. 

Why do we care?

Two perspectives.   Employees took titles rather than pay, or employers issued titles rather than pay.     If an employee knew it was a choice – more pay OR a title, which would they pick?      

Let’s assume positive intent on the part of employers.   With the new salary transparency movement occurring, this tactic will likely lose much of its effectiveness going forward.     Regardless of the why or how of this situation, employers won’t want to be caught with this reality in the future.    This is likely less of a concern for those in IT services… yet undoubtedly possible with some entry-level positions.    Be forewarned.

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