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

Posted: 11 Jan 2021 Last revised: 17 Dec 2023

See all articles by Lauren Cohen

Lauren Cohen

Harvard University - Business School (HBS); National Bureau of Economic Research (NBER)

Umit G. Gurun

University of Texas at Dallas

N. Bugra Ozel

University of Texas at Dallas

Date Written: November 27, 2023

Abstract

We find widespread evidence of firms appearing to engage in overtime payment avoidance by
exploiting a federal law that allows them to side-step doing so for “managers” who are paid above a
pre-defined salary threshold. We show that listings for managerial positions just above the federal
regulatory threshold exhibit an almost five-fold increase, including listings of managerial positions
such as “Directors of First Impression,” whose jobs are otherwise equivalent to non-managerial
employees (in this case, a front desk clerk). 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, as well as when there are weaker external local labor options. Lastly, the results are stronger in occupations with more volatility in labor demand, when there is more uncertainty in labor scheduling, and for occupations in low-wage industries that are penalized more often for overtime violations. Our results suggest a broad usage of overtime avoidance using job titles across industries, locations and over time - if anything becoming stronger 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.

Keywords: Manager Titles, Overtime, Strategic Use, Firm Power

JEL Classification: M51, M54, G30, G38

Suggested Citation

Cohen, Lauren and Gurun, Umit G. and Ozel, N. Bugra, Too Many Managers: Strategic Use of Titles to Avoid Overtime Payments (November 27, 2023). Available at SSRN: https://ssrn.com/abstract=3731176 or http://dx.doi.org/10.2139/ssrn.3731176

Lauren Cohen

Harvard University - Business School (HBS) ( email )

Rock Center 321
Soldiers Field
Boston, MA 02163
United States

HOME PAGE: http://www.people.hbs.edu/lcohen

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Umit G. Gurun

University of Texas at Dallas ( email )

2601 North Floyd Road
Richardson, TX 75083
United States

HOME PAGE: http://www.umitgurun.com

N. Bugra Ozel (Contact Author)

University of Texas at Dallas ( email )

800 W Campbell Rd
Richardson, TX 75083-0688
United States

HOME PAGE: http://sites.google.com/view/bugraozel/home

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