For four years beginning in 2014, Tiffany Palliser worked at Panera Bread in South Florida, making salads and operating the cash register in shifts that began at 5 a.m. and often lasted late into the afternoon.
Ms. Palliser estimates that she worked at least 50 hours a week on average. But she says that she did not receive overtime pay.
The reason? Panera officially considered her a manager and paid her an annual salary instead of hourly. Ms. Palliser said she was often told “this is what she signed up for” when she became an assistant manager.
Federal law requires employers to pay hourly workers overtime and a half after 40 hours, and to most salaried workers whose wages fall below a certain amount, currently around $35,500 a year. Businesses do not need to pay overtime to salaried employees who earn more than that amount if they are bona fide managers.
Many employers say that managers who earn relatively modest salaries have genuine responsibility and opportunities for advancement. The National Retail Federation, a trade group, has written that such managerial positions are “key steps on the ladder of career success, especially for many people without college degrees.”
But according to a recent article By three academics, Lauren Cohen, Umit Gurun, and N. Bugra Ozel, many companies offer wages just above the federal limit to frontline workers and mislabel them as managers to deny them overtime.
Because the legal definition of a manager is vague and little known: the employee “primaryThe job must be managerial, and the employee must have real authority: Mislabeled managers find it hard to push back, even if they mostly do hard work.
The paper found that, from 2010 to 2018, manager titles in a large database of job postings were nearly five times more common among workers who were at or just above the federal wage limit for mandatory overtime than among workers just below the limit.
“To believe that this would happen without these kinds of games is ridiculous,” said Dr. Cohen, a professor at Harvard Business School, in an interview.
dr. Cohen and his co-authors estimate that the practice of mislabeling workers as managers to deny them overtime, often based on dubious-sounding titles like “senior reservations clerk” and “food cart manager,” costs them workers about $4 billion per year, or more than $3,000 per mislabeled employee.
And the practice appears to be on the rise: Dr. Cohen said the number of papers with dubious-sounding management titles grew during the period he and his co-authors studied.
Federal data appears to underscore the trend, showing that the number of managers in the workforce increased by more than 25 percent between 2010 and 2019, while the total number of workers grew by about half that percentage.
From 2019 to 2021, the workforce was cut by millions, while the number of managers was not budgeted for. Lawyers representing the workers said they suspected companies mislabeled employees as managers even more often during the pandemic to save overtime while they were understaffed.
“There was a shortage of people with children at home,” said Catherine Ruckelshaus, general counsel for the National Employment Law Project, a worker advocacy group. “I’m sure that raised the stakes.”
But Ed Egee, vice president of the National Retail Federation, argued that the labor shortage is more likely to be reversed, giving lower-level managers the clout to negotiate more favorable wages, benefits and hours. “I would almost say there has never been a time when these workers are more empowered,” he said. (Pay for all workers grew much faster than pay for managers from 2019 to 2021, although pay for managers grew slightly faster last year.)
Experts say the denial of overtime pay is part of a broader strategy to reduce labor costs over the past decades by staffing stores with as few workers as possible. If a worker calls in sick or more customers show up than expected, the misclassified manager is often asked to perform the duties of a regular worker at no additional cost to the employer.
“This allows them to make sure they’re not hiring more staff than necessary,” said Deirdre Aaron, a former Labor Department attorney who has litigated numerous overtime cases in private practice. “They have assistant managers there who can take over.”
Ms. Palliser said her normal shift at Panera was 5 am to 2 pm, but she was often called in to help close the store when staff were short. If an employee didn’t show up for the afternoon shift, she usually had to stay late to cover for him.
“I was like, ‘My kids get out of school at 2. I have to go pick them up, I can’t keep doing this,’” said Palliser, who earned between $32,000 and $40,000 a year as an assistant. Manager. She said her husband later quit her job to help with her childcare responsibilities.
He won a share of a multimillion-dollar settlement in a lawsuit accusing a Panera franchisee, Covelli Enterprises, of failing to pay hundreds of assistant managers overtime. Panera and representatives for the franchise did not respond to requests for comment.
Gassan Marzuq, who earned a salary of about $40,000 a year as a manager at Dunkin’ Donuts for several years until 2012, said in a lawsuit that he had worked roughly 70 hours or more in a typical week. He found that he had spent 90 percent of his time on tasks like serving customers and cleaning, and that he could not delegate this work “because you are always short-handed.”
Mr. Marzuq ultimately won a settlement worth $50,000. A lawyer for TJ Donuts, the owner of the Dunkin’ Donuts franchise, said the company disputed Marzuq’s claims, saying “that he was properly classified as a manager.”
The workers and their lawyers said employers exploited their desire to move up the ranks to keep labor costs down.
“Some of us want a better opportunity, a better life for our families,” said Gonzalo Espinosa, who said that in 2019 he often worked 80-hour weeks as a manager at a Jack in the Box in California but was not paid for extra time. They use our weakness to their advantage.
Mr. Espinosa said his salary of just over $30,000 was based on an hourly wage of about $16 for a 40-hour work week, implying that his true hourly wage was closer to half that amount. , and well below the state minimum wage. The franchise did not respond to requests for comment.
Dr. Cohen and his co-authors’ paper includes evidence that companies in financial trouble are more likely to misclassify regular workers as managers, and that this tactic is especially common in low-wage industries such as retail, restaurants and cleaning services.
Still, lawyers bringing such cases say the practice also occurs regularly in white-collar industries like technology and banking.
“They have a job title of relationship manager or personal banker, and they greet you, try to get you to open an account,” said Justin Swartz, a partner at Outten & Golden. “They are not managers at all.”
Mr Swartz, who estimated that he had helped bring more than two dozen overtime cases against banks, said some involved an alleged branch manager inside a big box store who was the only bank employee on the premises and it largely performed the functions of a Blade.
The practice appears to have become more difficult to stamp out in recent years, as more employers have required workers to sign contracts with mandatory arbitration clauses that exclude lawsuits.
Many of the cases “are no longer economically viable,” Swartz said, citing the increasing difficulty of bringing them individually through arbitration.
Some lawyers said only an increase in the cap below which workers automatically receive overtime pay is likely to be significantly purely misclassification. With a higher cap, simply paying workers overtime is often cheaper than avoiding overtime costs by substantially increasing their salary and tagging them as managers.
“That’s why companies fought so hard under Obama,” said Ms. Aaron, a partner at Winebrake & Santillo, referring to a 2016 Labor Department rule that raises the overtime limit to about $47,500 from about $23,500. A federal judge suspended the rule, arguing that the Obama administration lacked the authority to raise the salary cap by such a large amount.
The Trump administration subsequently adopted the current limit of around $35,500, and the Biden administration has indicated that it will propose raising the limit substantially this year. Business groups say such a change won’t help many workers because employers are likely to cut base wages to offset overtime pay.