When folks go to work for a company, they often have aspirations beyond the entry level position. For anyone with a bit of ambition, the goal is typically to work hard, get noticed, move up the ladder, and eventually find your way into a management position with more perks and pay.
Leadership carries responsibility, usually increased compensation, and recognition for quality performance. So when an employee hears that she is receiving a promotion to a management position, it is usually good news.
Or is it?
Ever since the pandemic hit, the nation and employers began feeling the strain of finding good workers who would show up and perform in a pinch. The ways employers view employees have changed. Many employers have decided to promote those employees to management titles, but not for the positive reasons that you might presume.
What has really been taking place is this: employers need employees to fill slots in schedules that have gone vacant because either they can’t hire a sufficient amount of staff, or employees are not showing up for work.
But for those accountable employees who show up and perform, they will often be asked or required to work in excess of forty hours a week. That has created a problem for employers because when an employee works more than forty hours in a week, he is likely eligible for premium overtime pay at one and half times his regular rate of pay.
Unscrupulous employers will want to avoid paying these premium rates to their workers. So they find a work-around. They promote those workers into a “management” position and then assert that the new manager is exempt from overtime pay.
Get a promotion and take a pay cut. What a deal.
However, just because an employer calls you a manager and pays you a salary, it does not mean that you are ineligible for overtime pay. The title you have and the way you are paid do not determine whether or not you are eligible for overtime pay.
In fact, if you earn less than $35,500 a year, you are eligible for overtime pay whether you actually perform managerial duties or not.
But if you earn more than $35,500 annually, you may still be eligible for overtime pay, even if you have risen to a “management” position at your company. That is because under the law, eligibility for overtime depends upon the duties that you perform and the categories of work that you do. Titles are essentially irrelevant.
A recent study by the National Bureau of Economic Research found that there was “widespread evidence of firms appearing to avoid paying overtime by exploiting a federal law that allows them to do so for employees termed as ‘managers’ and paid a salary above a pre-defined threshold.” According to the study, five times as many jobs were identified as managerial at pay rates just slightly above the $35,500 threshold as those just slightly below that threshold. There was obvious “gaming” of the system occurring according to the study.
According to the study, the gamers of the system see a 13.5% savings in payroll as a result of the gamesmanship.
It is important to know that just because you are paid a salary or called a “manager,” it does not mean that you are not eligible for overtime pay. In most situations you probably are eligible.
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