Harley-Davidson Overtime Initiative Shows Complex Challenges

By Robert Teachout, SHRM-SCP Nov 8, 2016

As the Dec. 1 effective date of the U.S. Department of Labor's updated overtime rule draws near, employers are scrambling to make the changes required by the revised provisions. The new requirements more than double the salary threshold for salaried employees to be exempt from overtime pay (from $455 per week to $913 per week). Because of the large jump in salary, the DOL estimates more than 4 million currently exempt employees will suddenly be eligible for overtime pay.

Handling this regulatory change is proving to be complex, not only for small and medium-sized businesses, but also for large national and multinational employers, as Harley-Davidson Motor Company has discovered.

Limited Approaches

Employers have limited approaches to comply with the new overtime requirements, according to Eric Meyer, an attorney with Dilworth Paxson LLP in Philadelphia:

  • Give raises to currently exempt employees who are paid below the new threshold up to the salary level needed to continue qualifying for the exemption.
  • Reclassify currently exempt employees who are paid less than the salary threshold as nonexempt and limit overtime possibilities.
  • Reclassify affected salaried employees as nonexempt and convert them to hourly status, and readjust their wages down, accounting for the same number of hours worked per week and the overtime that will have to be paid as a result.

[SHRM members-only toolkit: Using Overtime Effectively]

While small- and medium-sized businesses may use only one or two of these options, large employers likely will need to use a combination of all of them.

Harley-Davidson's Experience

The experience of Harley-Davidson Motor Company, the iconic American motorcycle manufacturer, shows the complexity of the choices large employers face as they prepare to comply with the new requirements.

Headquartered in Milwaukee, Harley-Davidson is a global company with 5,592 employees in the United States. Tchernavia Rocker, vice president of human resources, explained the challenge the company faced of trying to comply with the new regulations in a way that addressed employee and company needs, while remaining true to its mission and culture.

"At Harley-Davidson, we are committed to treating our employees in a manner consistent with our valued behaviors, and ensuring our employees receive market-competitive and sustainable incomes and benefits to support their families and community," said Rocker. The company lists its valued behaviors as being accountable, modelling integrity, valuing individuality and diversity, inspiring teamwork and encouraging creativity.

Rocker explained that it was important at the start of the initiative to bring the company in compliance with the new rule to have senior leadership agree on what a successful outcome would be. Leaders wanted to ensure "that employees' current base salaries were not negatively impacted by the regulation, while still maintaining a sustainable cost structure."

The project's biggest challenge, said Rocker, was completing an impact analysis and developing options that complied with the law, yet remained consistent with the company's values and compensation philosophy. "We took an organizational design and process improvement approach to assess and inventory the work being performed," she explained, and then prioritized work activities by business importance, focusing resources on more value-added work.

Gaining a clear understanding of the work being performed enabled the company to better balance its business needs, the new compliance requirements and Harley-Davidson's commitment to treating employees fairly, Rocker said. With that information in hand, they were ready to act.

"We took a multiprong approach, including a combination of solutions such as providing raises, reclassification and limiting OT, based on an individual analysis of impacted employees," said Rocker. By the end of the analysis, over 500 hourly professional positions were reassessed, and the company reclassified approximately 150 roles as nonexempt.

As Harley-Davidson implements these changes, it also has crafted a communications plan to help employees who are transitioning from exempt to nonexempt, and from salaried to hourly status. The company is launching manager and employee training and a campaign of one-on-one meetings with the affected employees to communicate the changes and why they are happening.

"We believe that individual meetings—versus broad employee communications—will provide the appropriate forum to fully discuss the change with employees and their ongoing value to the company," Rocker said.

Robert Teachout, SHRM-SCP, is a writer in Washington, D.C., who covers employment law and HR issues. 

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