The Chilling Effect Sets In On DEI Initiatives

In July’s newsletter, we covered the Supreme Court's ruling in SFFA vs Harvard & UNC, which effectively ended race-conscious admissions practices at colleges and universities. 

We noted then that forward-looking HR professionals may wish to consider their hiring practices and diversity-promoting initiatives in light of the new precedent, as similar challenges to race consciousness in the corporate world were likely not very far behind. 

As it turns out, the wait was even shorter than we’d anticipated, and those very challenges have already begun, with multiple lawsuits against multiple corporate entities having already been filed by an organization called American Alliance for Equal Rights.

The organization was launched by the very same person who founded Students for Fair Admissions - the plaintiff organization in the Harvard and UNC suits.

Just last month, the American Alliance for Equal Rights filed a claim against a venture capital group that provides grants to black women who are small business owners. The group also filed suit against two law firms claiming that their diversity programs illegally excluded applicants on the basis of race. 

Opposition to DEI Programs

Recent actions against diversity, equity, and inclusion (DEI) initiatives include warnings from 13 state attorney’s general to Fortune 100 leaders, as well as lawsuits against companies like Kellogg's and Nordstrom. These actions signal a growing legal challenge to corporate DEI efforts.

Legal Precedents and Timelines

The Supreme Court's recent ruling against affirmative action in college admissions sets a precedent that could influence corporate DEI initiatives. Legal battles over DEI could take years to resolve, as evidenced by the nearly decade-long Harvard and UNC cases.

Immediate Impact on Corporate Practices

While court decisions may take time, the impact on businesses is immediate. For instance, one law firm under lawsuit has already opened its DEI fellowship to all races.

Business vs. Academic Incentives

Corporations, unlike educational institutions, have historically been less motivated to fight anti-diversity legal challenges. This could result in a "chilling effect," dampening DEI efforts across various industries.

Future of DEI

Despite the challenges, the benefits of DEI are well-recognized, and resistance against these legal actions is expected. The future of DEI may be determined within companies long before the Supreme Court revisits the issue.

Economic Outlook

New Jobs/Unemployment

The US added 187 thousand jobs last month, which is a small uptick from the adjusted numbers from the month before, but generally represents a continuation of the overall trend of slowing demand for labor that we’ve seen over the past few months.

At the same time, the unemployment rate rose by three-tenths of a point to 3.8%, which remains a historically low figure although it is the highest that the unemployment rate has climbed since February of 2022. 

Job Openings

The number of job openings fell to about 8.8 million in July (the most recent data available) - down from an adjusted 9.2 million in June, continuing the general downward trend.

New hires dropped to about 5.77 million, a reduction of approximately 170 thousand from the month before, and down about 600 thousand from July of 2022.

The adjusted hiring rate remained largely unchanged, with the national average down from 3.8% to 3.7% over the month.

The South maintained the strongest hiring rate at 4.1%, though the South also claimed the largest month-over-month hiring rate reduction at minus 0.2%, while the Northeast and Western regions both saw their hiring rates match the national 0.1% decrease last month (down from 3.1% and 3.6%, respectively). The Midwest region’s hiring rate  held steady over the month at 3.6%.

Separations

The separation rate ticked down a tenth of a point to 3.5% and total separations fell by about 200 thousand to 5.5 million.

The number of job quitters also fell by about 250 thousand month over month, down from an adjusted 3.8 million to 3.5 million, while the quit rate dropped by about one-tenth of a point from 2.4% to 2.3%.

Layoffs and discharges rose slightly from 1.5 million to 1.6 million while the layoff and discharge rate was unchanged at 1%.

Inflation

CPI for the last 12 months rose to 3.7% in August, which remains below the 3.8% average annual inflation measured over the last 40 plus years. That said, the 0.6% registered over the month is three times larger than the 0.2% increase registered the month before, indicating that inflationary concerns have not quite been tamped out entirely yet. 

Employee Benefits

Leave Being Left On The Table

According to a recent survey conducted by Pew Research Center, 46% of American employees with PTO benefits are leaving vacation days on the table, are neglecting medical appointments, and/or coming into work with minor illnesses instead of utilizing their prescribed sick days. 

Other key findings from the survey include:

• Employees with income in the upper ranges were more likely than their middle-income and lower-income to underutilize their PTO, with 51% of upper-income taking less personal time off than offered, whereas 45% of middle income and 41% of lower-income workers left PTO days unused;
• The level of education attained by employees correlates to their willingness to take time off, with more than half (51%) of workers that have a bachelor’s degree or higher indicating a reluctance to take time off while about 10% fewer less-educated workers (41%) reported foregoing the time off that is offered to them. 
• 51% of salaried employees forgo some portion of their allotted paid time off compared to 39% of hourly employees who do the same, while 54% of managers take less time off than they could relative to the 42% of non-managerial employees. 
• Employees in the fields of education, public administration, government, and the military are especially likely to show up at work more often than they’re technically required to. 
• 52% of employees who don’t maximize their PTO simply said they didn’t need as much time-off as was available. Nearly as many at 49%, however, cited concerns about work piling up when they are away from the job, which is a concern shared by the 43% who limit their time-off because they feel bad about the extra burden their coworkers have to shoulder when they’re not there to carry their weight.

Talent Retention Prioritization

According to Gallagher’s 2023 U.S. Organizational Wellbeing Report more than half of operational professionals and almost 2 out of 3 human resources professionals cited employee retention as their current top priority. 

The report also highlighted 2 factors that are gaining increased relevance when it comes to talent attraction and retention  - whether or not the overall experience for employees on the job is generally positive and whether or not the employer is providing comprehensive benefits offerings. 

Other noteworthy findings include: 

• In 2022, 51% of employers reported a turnover rate of 15% or more, which is an uptick of 3% over 2021 figures when 48% reported turnover at a rate of at least 15%.
• Compensation is also on the rise in 2023 with nearly 8 out of 10 employers increasing their employee base salaries from their current levels, and about 4 in 10 employers improving their variable compensation calculations in their employees’ favor. 
• Nearly 4 in 10 companies are expanding their health care benefits despite that more than half are anticipating increased baseline health care expenditures in 2023, which many are attempting to offset via the adoption of additional telemedicine and other price-reducing technologies and decision support platforms.
• Optimism among the responding organizational leaders when it comes to expectations for future growth with about 6 in 10 employers expecting to see both an increase in revenue and an increase in their number of employees by next year.

Closing Employee Benefits Perception Gaps

Benefits PRO recommends 4 simple strategies for making sure that employees are seeing the same value in their benefits package components that the company’s human resources professionals and benefits managers expect those offerings to convey.

• Ask employees what they think about their benefits, what the pain points are, and what can be improved;
• Listen to the answers that their employees are providing. Too often, whether information is obtained through a survey or through a face-to-face conversation, the employee responses are logged, the notes are summarized, averages and/or summaries are compiled, and the work is considered done. In reality, asking is the easy part, but actually hearing the concerns and opinions expressed by employees anew in a way that enables you to internalize how those challenges have evolved since your last check in and in what ways any efforts taken to address those kinds of problems in the past have fallen short or succeeded. Also, it’s important to listen not only to the information that is being conveyed, but also the emotion and intensity behind that information.
• Act upon what you have heard coming from your employeesEven a step in what is ultimately determined to have been the wrong direction can build some momentum that can lead to positive change and will give employees confidence that their voices are being heard.
• Repeat the previous three steps. For this kind of system to be effective, it needs to be ongoing and self-correcting through each new cycle.

Managing Caregiving Employees

More than 50 million workers in the US spend a significant portion of their non-working hours as primary caregivers for dependents and family members with about 1 out of every 6 employees spends approximately 20 hours a week on average taking care of a relative or friend in need of assistance, and those numbers are poised to climb.

One of the most important factors to bear in mind when considering the lived experience that caregiving employees endure is the high rate of burnout.

It’s also a good idea for employers to recognize the guilt and stress that caregivers regularly internalize as they struggle to meet their daily demands, especially given the massive shortages in childcare and senior care which often leave people with no good options at no fault of their own. 

Some of the practical benefits for employers to consider incorporating into their offerings that can help address the issues caregiver employees face include generic options like remote or hybrid-work scheduling, as well as offerings that are much more specific to servicing caregiving employee needs, like assisting employees with Family Medical Leave Act navigation and optimization, or directing employees through resources such as the AARP’s Employer Caregiving Toolkit or the Caregiver Support Network. 

Employers can also offer services that indirectly assist employees with managing some tangential responsibilities that accompany their caregiving role, including the preparation of legal documents, assigning power of attorney, and with mental health and wellness support. 

Legal/Compliance

Overtime/Minimum Wage Exemption Thresholds

A new rule proposed by the Department of Labor would increase the minimum salary threshold above which employees can be exempted from minimum wage and overtime laws. 

Current EAP exemptions, for example, allow for executive, administrative, and professional employees who earn $684 dollars per week ($35,568 per year) or more to be exempted from minimum wage and overtime regulations, but the proposed change would increase that weekly pay minimum to $1,059 per week or $55,068 per year.

The new rule also proposes raising the minimum salary for employees to qualify for the highly compensated employee, or HCE, exemption as well. Currently, for employees to be exempted from minimum wage and overtime requirements as a result of their high level of compensation, they must be paid a minimum of $107,432 per year, but under the intended rule changes, that threshold will be raised by more than a third to $143,988 per year. 

Further, the new rule as proposed will also automatically increase these pay thresholds for EAP and HCE exemptions every three years to ensure the minimum pay scales stay relevant in light of evolving market conditions. 

Some of the adjustments that employers will have to make in response to the proposed changes include:

• Reclassifying employees who were previously exempt but no longer meet the minimum pay thresholds, which may be a significant administrative burden;
• Budgeting for overtime pay in consideration of the formerly exempt employees that will now qualify for overtime when they exceed 40 hours in a given week;
• Making adjustments to scheduling and operations planning in order to minimize the anticipated additional overtime pay;
• Training formerly exempt employees on how to track their hours, breaks, and overtime in line with company policy; and 
• Ensuring that any new protocols and operational plans that are developed in response to the new regulatory environment also comply with any relevant state laws covering minimum wage and overtime issues. 

Updated I-9 Forms Now Available

There will be an updated Form I-9 available from the US Citizenship and Immigration Services beginning on August 1, 2023, which can be found here. 

The most recent prior version of  I-9 (Revision 10/21/19) will still be accepted until October 31, 2023, at which point the soon-to-be-released update (known as Revision 08/01/223) will be the only valid and acceptable version of the form. Employers need not fill out a new version of the form for current employees that already have properly filled-out and submitted forms processed in the system unless reverification is necessary at some point after October 31, 2023.

The new version of the I-9 form can also be accessed, filled-out, and submitted electronically via tablets and mobile devices now, as well.

Power to Pump Campaign

The Pump Act was enacted at the close of 2022 and significantly builds upon the foundational protections for nursing employees that were established in the Fair Labor Standards Act and expands those protections to include workers in industries like agriculture, service and hospitality, transportation, and education. 

Under the Pump Act, for a period of at least 1 year following the birth of the baby, employers are required to provide applicable employees both work breaks and privacy sufficient to express breast milk while on the job. The Pump Act also outlines the remedies available to employees if the rights provided to them under the Pump Act are violated by their employer.

Tech

Cyber Insurance Market Set To Climb

Many insurance carriers have suggested that their cyber insurance policy prices may be going up, yet none has been the first to move. The expectation is that the first carrier to increase prices will catalyze the other carriers into similar action, but the first mover also risks lost market share to competitors whose prices suddenly are more favorable.

Further, while cyber insurance policy prices have come down some from their recent pandemic peak, ransomware attacks are again continuing to climb, as are data privacy lawsuits and pixel tracking claims, so there’s good reason to believe that insurance carriers will respond to similar conditions with similar price hikes as they have in the past. 

That said, the cyber insurance market may have reached a level of maturation at this point that it won’t be as influenced by these forces as it maybe has in the past, and any price increase that we will see will probably be less rapid and steep. The underwriting process has been adapted to put greater emphasis on network security, which should have a stabilizing effect on the market as a whole, for example.

Technologies Impacting HR and Insurance

Some of the technologies that are becoming most crucial to insurers and enabling their users to efficiently innovate and improve the experiences and outcomes of their customers include:

• Cloud-based data management and platform hosting;
• APIs;
• Microservices;
• Containerization;
• Artificial intelligence systems; and 
• Up-to-date and intuitive user-interface functionality is also increasingly important when catering to the more tech-savvy or at least tech-oriented younger population. 

It’s also important to note that incorporating these technologies into operational systems isn’t sufficient without also taking steps to shape company culture, establish employee buy-in, and educate/support customers in order to make the transition as seamless and efficient as possible.