In January of 2023, the National Bureau of Economic Research (“NBER”), a non-profit, non-partisan research organization, published a paper identifying and discussing an increase in employers mislabeling employees as exempt under the executive exemption of the Fair Labor Standards Act (“FLSA”). The practice involves giving employees managerial titles even when many or most of the employees’ tasks are not managerial in nature, which can cause some employees to believe they are properly classified as exempt when they in fact are misclassified. The employer is then able to claim the employee does not qualify for overtime pay, so long as the employee is paid a minimum salary (currently set at $35,568 per year).
Often, these employees routinely work schedules of over forty hours per week, but are told by their employers that they are not eligible for overtime due to their purported managerial status. The FLSA requires that employees have a “primary duty” of managing the business or a department of the business, “regularly” manage at least two other employees, and have influence on hiring and firing decisions. As a result of the vagueness of this definition, some employers try to circumvent their obligations to pay overtime by classifying the workers as managers. These workers often have similar tasks to their lower-level counterparts, and can fill in for lower-level workers that call out sick without extra cost to the employer. Although these workers may have “manager” in their title, it is the actual, day-to-day job duties that matter for classification purposes rather than title. If most of a worker’s daily tasks are not managerial in nature, then classifying them as exempt is a violation of the law, and the employee may be entitled to damages.
The NBER’s paper discusses a marked increase in manager roles in the United States. Between 2010 and 2019, employees with a manager title increased by 25%, while overall, jobs grew only about half that amount. NBER found that job listings for “managerial” positions with salaries hovering right at the $35,568 minimum have increased greatly in recent years. Employers have been able to avoid substantial wage pay outs; it is estimated that employers circumvent approximately 13.5% of wage payments for each “manager” hired during the study’s sample period.
A recent multimillion dollar settlement involving a Panera Bread franchisee owner, Covelli Enterprises, involved allegations of failure to pay overtime to hundreds of assistant managers. The practice is common in white collar jobs as well.
If you have a manager title and are not eligible for overtime, but a considerable part of your job duties are not managerial in nature, please reach out to our firm for a consultation.
