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DEI
Target and The Future of DEI
Many companies have been adjusting DEI approaches in recent months, but Target's actions have resulted in boycotts led by both groups that support and oppose DEI initiatives.
March 18, 2025
Key Takeaways
Target and The Future of DEI
Diversity, Equity and Inclusion (DEI) programs experienced a rapid increase in stature followed by a near equally rapid rise in pushback over the last 5 years. Perhaps no company has felt that whiplash more than multi-category retail giant Target, whose experience provides an excellent case study to understand what has been happening with DEI policy as well as what will happen next.
Over the course of February 2025, Target found itself on the receiving end of a class action lawsuit brought by shareholders who claim Target’s pro-DEI policies led to significant losses of stock value, while at the same time, facing a targeted boycott led by pro-DEI supporters who aim to punish Target for rolling back some of those very same DEI policies that led to the class action suit.
If they were aiming to find themselves between a rock and a hard place, it looks like Target may have hit the bullseye.
While the momentum certainly appears to have shifted against DEI policies over the last couple of years, the coming months and years will likely be even more instrumental in determining the ultimate fate of the DEI movement and whether the accompanying programs will be retired, resurrected, or if they will simply be reorganized to continue the mission of promoting the principles of diversity, equity and inclusion under a different acronym.
The roots of modern DEI programs date back to the summer of 2020 when George Floyd was killed less than 10 minutes from Target’s headquarters in Minneapolis, and that proximity was a significant factor in inspiring Target to lead the way in mainstream corporate DEI adoption.
In response to that incident and the resulting movement which turned the spotlight around on systemic racism and other prejudice, Target pledged to establish a Racial Equity Action and Change committee, increase its proportion of black employees by 20%, and spend more than $2 billion dollars with black-owned businesses.
Of course, Target was not alone in joining the DEI bandwagon, with one McKinsey study estimating that companies worldwide spent about $7.5 billion on DEI-related expenditures in 2020, and as recently as early 2023 that figure was projected to double to $15.4 billion by 2026.
Over the course of 2023, however, DEI program adoption seemed to have hit a peak according to a study from Paradigm, which estimated that 54% of US companies budgeted for DEI program expenditures in 2023, which was down from 58% who had done so in 2022.
While the percentage of companies that had a specific DEI strategy fell by an even greater margin between 2022 and 2023 (minus 9%), 2023 wasn’t all bad news for DEI programs given that the percentage of US firms with senior DEI leadership roles increased by 6% over the year, and an additional 3% began tracking race representation in the lines of business of each of their executives.
2023 also happens to be the year in which most of the DEI-related activities and relevant events alleged in the class action suit against Target took place.
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On the last day of January 2025, the police pension fund for the city of Riviera Beach, Florida initiated a class action suit in federal court against Target claiming that Target’s DEI-related activities were a violation of the Securities Exchange Act.
According to the complaint, Target defrauded shareholders by failing to disclose the risks associated with their DEI (and ESG) mandates, which made Target’s share price artificially high as a result, so that anyone who purchased Target stock during the period of artificial inflation should be due compensation (August 26, 2022, through November 19, 2024).
The lawsuit alleges that those theoretical DEI risks became real losses in May 2023 when a boycott was staged against Target due to its Pride campaign, which resulted in a drop in stock price of almost 25% from the middle of May 2023 to the Middle of June 2023, as well as a 5% drop in sales during the second quarter of 2023, which caused another 15% stock price reduction when those sales figures were released in mid-August 2023.
Proceedings will continue in April 2025 after the notice period for potential lead plaintiffs to come forward has concluded.
Exactly one week before the Riviera Beach police pension fund initiated its civil complaint in federal court, Target announced that it would be concluding its 3-year diversity equity and inclusion goals and would not be renewing its Racial Equity Action and Change initiatives.
The seemingly abrupt end of those programs was quickly followed by calls for a new boycott of Target, this time led by pro-DEI groups like the Racial Justice Network and churches, which has resulted in Target’s inclusion among a group of US companies that were subject to a 1-day blackout boycott on the last day of February 2025 and calls for an additional boycott of Target over the Lent holiday from March 5 through April 17, 2025.
In short, Target is still in the middle of the storm - the stock price has fallen by more than 18% in the time since the announced closure of these DEI programs and this writing (March 11, 2025), 15% of which occurred before the major market corrections of the past week - and the accompanying loss of sales won’t be reported until June when the stock price is likely to take another substantial hit depending on how effective, widespread, and lasting/repeated the boycotts are.
And Target is not the only company facing these boycotts and/or threats of boycotts, nor is it the only one backing away from previous DEI positions and commitments.
Forbes constructed a timeline that documents how US companies have been responding to the changing DEI environment, which taken as a whole highlights just how quickly the momentum against DEI initiatives has developed.
In the spring of 2024, Harley Davidson ended some of its DEI-related activities. A few months later in mid-summer of 2024, John Deere announced that it would remove from company materials any messages that were socially motivated, and it would no longer support certain cultural awareness events like pride parades.
Over the next several months leading up to the 2024 election, several major corporations - including Lowes, Boeing, Coors, Ford, and Jack Daniels manufacturer Brown-Forman - followed suit and rolled back DEI initiatives in one way or another, ranging from no longer participating in diversity surveys to removing DEI-related goals, either as benchmarks for internal incentives or external suppliers.
In the months following the election in November 2024 and especially over the course of February 2025, however, the corporate DEI revision/excision began gaining significant steam, with Walmart altering its DEI commitments, McDonald’s adjusting diversity-related goals, Meta abandoning some diversity initiatives and pro-inclusivity training, and Amazon stating in an internal memo that they would be moving on some outdated practices and language, which some people interpreted to reference DEI practices.
When President Trump took office and began releasing executive orders - including a now-on-hold order that limited the use of DEI initiatives by federal employers and federal contractors - the number of US employers who began backtracking from previously imposed programs and policies that promoted diversity and inclusion grew substantially, with Target obviously, as well as Google, Amtrak, Accenture, Chipotle, Coca-Cola, Pepsi, GM, GE, Intel, Paypal, Deloitte, Goldman Sachs, JPMorgan Chase, Citigroup, BlackRock, Bank of America, Paramount, Comcast, Warner Brothers, Disney, and PBS all joining the ranks of companies that made changes to their DEI policies and practices just in the final week of January through the beginning of March 2025.
Some of those employers are federal contractors and are taking proactive steps to comply with the new regulations, while others aren’t necessarily required to reduce DEI but are choosing to do so nonetheless.
At the same time, however, some organizations - whether subject to the new DEI-limiting orders or not - may be making superficial changes to their DEI language in compliance with new standards while maintaining a commitment to the principles of diversity, equity, and inclusion, and it remains to be seen how this strategy will play out in practice.
Target’s situation perfectly encapsulates some of the pitfalls that come with serving a broad consumer base during polarized times, and it has apparently disappointed parties situated on both sides of the line in the sand as a result.
One potential takeaway from Target’s situation is that supporting any issue - even one that may seem to garner broad public support - ultimately may have the potential to cause a negative counteraction among a substantial portion of your consumer base nonetheless.
In that light, the Target story may look like a cautionary tale about the difficulty of knowing when to hold on and when to let go as the social pendulum is swinging.
Target clearly didn’t ‘time the market’ right in terms of minimizing backlash to its adoption/scaling-back of DEI work, but it is not at all clear yet that the flurry of companies that have abandoned DEI initiatives over the past couple of months have ‘timed the market’ any better. If predicting social trends were easy, these companies wouldn’t have to be backtracking on their DEI programs in the first place.
Although the DEI brand has clearly suffered over the past couple of years, the bigger story of building diversity, equity, and inclusion in the workplace dates back to long before 2020, and while it is not yet clear whether “DEI” as a department/buzzword/scapegoat is becoming obsolete, the principles that DEI represents are certainly not.
McDonald’s changed the name of its Global DEI Center of Excellence to the Global Inclusion team a couple of months ago to distance itself from the DEI label, similar to Walmart renaming its Chief Diversity Officer to its Chief Belonging Officer a couple of years ago.
That said, Target similarly renamed its supplier diversity team (which became its supplier engagement team) when it announced the conclusion of its DEI initiatives, but given the subsequent backlash and boycotts from pro-DEI groups, however, Target may have been better off not going out of its way to so openly distance the company from the word diversity as the other DEI initiatives concluded - which further underscores the difficulty of timing the pendulum swing. It is a very hard target to hit.
Editor's Note: This report is based on survey data from February 2025 that was published in March 2025. This is the most recent data available. (Source: Bureau of Labor Statistics)
US employers added 151 thousand jobs last month, which was just short of the predicted 160 to 170 thousand and just over the 143 thousand jobs initially reported last month, while there was very little movement in the unemployment rate, rising by less than one-tenth of a point to 4.1%.
There was very little movement in most of the employment metrics, although the employment-population ratio fell by two-tenths of a point to 59.9% - which is only the second time this figure has fallen below 60% since November of 2022 (this ratio was 59.8% in November 2024).
The biggest changes occurred in the number of people who were employed part-time for economic reasons, which grew by almost 11% from under 4.5 million to over 4.9 million, and the number of people who are unemployed but want a job rose buy more than 7.5% to 5.9 million, which may be the strongest indications of a softening labor market in an otherwise largely stable report.
The healthcare industry added the largest number of jobs at 52 thousand, which is right in line with the 54 thousand jobs the healthcare industry has added on average each of the previous 12 months.
The financial services industry added the next largest number of jobs at 21 thousand, which is more than 4 times greater than the 5 thousand job additions the industry had added on average over the last year, while the transportation & warehousing industry added about 18 thousand jobs, well above the current 13 thousand monthly average, and the social assistance industry added about 11 thousand jobs, which is a little less than half of the running monthly average.
The leisure and hospitality industry recorded a net loss of about 16 thousand jobs, while the retail industry saw a decrease of 6 thousand jobs, and there were about 10 thousand net government jobs lost over the course of the month.
Average hourly pay rose by about 10 cents to $35.93 per hour (an increase of 0.3%), while the length of the average workweek held steady at 34.1 hours per week.
This report represents the first set of employment situation data collected exclusively under the second Trump administration, but the next few months are when we’ll begin really seeing more direct impacts from the resulting changes in policies, and it will take another several months beyond that before many of the tangential effects become more apparent.
In the meantime, the Chairman of the Federal Reserve says the economy is in good shape, and reiterated the Fed’s wait-and-see approach with interest rate cuts. While the Fed cut rates by a quarter percentage point 3 times next year, and analysts and investors are still predicting another 2 or 3 comparable rate cuts in 2025, the Fed has indicated it is in no hurry to continue cutting rates, especially in light of the 4% annual wage growth over the trailing twelve months.
The assumed interest rate cuts may be in part based on the increasing likelihood of economic downturn if not recession on the horizon, which more economists are predicting within the next year than were doing so just a couple of months ago. Should such a downturn materialize, it will likely inspire the Fed to act quickly in bringing down rates.
While some of the new administration’s federal workforce cuts may be reflected in the data of this latest report, most of the cuts made so far and the impact of those cuts, as well as the complementary private job losses, won’t begin showing up in this report until next month.
Those disruptions to the labor market combined with uncertainty about consumer goods prices and international trade in part due to tariffs and tariff posturing, have led to predictions of significant GDP contraction of almost 2.5% in the first quarter of 2025 by at least one Federal Reserve Bank.
There are a lot of moving parts that will ultimately shape the short-term economic future, and those kinds of dynamic systems are difficult to predict even without so many potential variables in flux both domestically and internationally.
That said, as more economic analysts are becoming more pessimistic in their predictions, it is worth considering that trend as a data point worth taking into account in its own right, and we'll continue updating the outlook as more data comes in in the coming months.
Check out the Mployer blog here.
Each month, Mployer collects and presents some of the most relevant and most pressing recent changes in law, compliance, and policy in areas related to employee benefits, health care, and human resources.
If your organization is using the alternative method for distributing 1095-B and 1095-C forms in accordance with the Paperwork Burden Reduction Act, your website must be in compliance from the first business day of March through at least October 15th. You can find guidance from the IRS about how to properly follow compliance protocols here.
On February 21, 2025, a federal judge put a stay on Trump’s Executive Order limiting the ability of federal agencies and federal contractors to operate Diversity Equity and Inclusion programs. The court questioned whether the order violated free speech rights and potentially illegally restricted otherwise legal actions taken by private entities. You can find the decision here.
From February 1st to April 30th, non-exempt (low-hazard) employers who had at least 11 employees at some point in 2024 must post in a conspicuous place a copy of OSHA Form 300A, Summary of Work-Related Illness and Injury, certified by a company executive.
For non-exempt employers that had 250 or more employees at some point last year and employers with 20 or more employees in specified high-risk industries, OSHA requires electronic submissions, which are due by March 2nd, 2025.
You can find the electronic submission platform here.
In his first days since returning to office, President Trump has signed a series of executive orders dealing with labor and employment issues for federal employees and federal contractors, with more expected still to come.
While thus far these orders don’t apply to private employers in general - with the exception of those that accept federal funds and/or are federal contractors - these orders will not only affect a sizable portion of the workforce directly, but they will also likely inspire some private employers to modify their practices and follow the example set by the executive branch.
The new rule that will most likely have the largest impact beyond the sphere of federal employees is Executive Order 11246, which makes it so that federal contractors no longer have to practice affirmative action in the hiring process for most protected classes. The only protected classes excepted from the order are veterans and individuals with disabilities, for whom affirmative action standards still apply.
Although federal contractors will no longer be required to maintain affirmative action programs, Title VII of the Civil Rights Act remains in effect to prevent discrimination against protected classes like race, gender, sexual orientation, and national identity.
You can read more here
A Federal District Court Judge in Northern Texas ruled that American Airlines had breached its fiduciary duty by working with an investment manager that promoted ESG practices in a way that ran counter to the economic interests of the employee retirement fund beneficiaries.
The repercussions of this ruling could be industry-reshaping if upheld, although there were many additional conflicts of interest between American Airlines and their investment fund manager that may limit how broadly applicable the ruling will ultimately prove to be.
The judge has already found American Airlines in breach of their fiduciary duty, but he has yet to assess damages, which will influence the probability of appeal and the likelihood of copycat cases.
You can read more about this case here.
As of January 13, 2025, the extension period for certain renewal Employee Authorization Document (EAD) applications filed on May 4, 2022 or later has been formalized at 540 days.
You can read more here.
As of January 1, 2025, the IRS mileage reimbursement rate for road miles driven for business purposes increased by 3 cents per mile from 67 to 70 cents per mile driven.
The IRS released a statement announcing a 25-cent increase in Patient-Centered Outcomes Research Institute fees for covered plan years ending on or after October 1, 2024, and before October 1, 2025.
The new fee is $3.47 per covered life.
You can read more here.
In response to a Federal Court of Appeals Decision that vacated the so-called 80/20/30 rule that was instituted in 2021, the Department of Labor officially reverted to the previous tip credit rule.
You can read more here.
In the final days before Christmas a few weeks ago, the Employer Reporting Improvement Act both became law.
As of January 1, 2025, the threshold for what qualifies as affordable coverage is now 9.02%, which means that an employee’s required contribution to the plan can be no more than 9.02% of their salary in order for the plan to be considered affordable and to avoid potentially paying the penalty.
You can read more about the affordability threshold here.
A federal court in Texas determined that the Department of Labor exceeded its authority last summer by increasing the minimum pay thresholds for employees to qualify under the executive, administrative, and professional and highly-compensated employee exceptions to minimum wage and overtime protections.
Those minimum pay thresholds have reverted to their prior levels - back to $684 per week for the EAP exemption (down from $844 per week under the now defunct rule), and back to $107,432 per year for the HCE exemption (down from $132,964 per year under the now defunct rule).
NLRB Says No Captive Audience Meetings on Unionization Issues
The National Labor Relations Board has issued a decision prohibiting employers from forcing employees under threat of punishment to attend meetings during which the employer will share views on unionization or its impacts.
Employers are allowed, however, to convene employees and share their views on unionization and potential impacts so long as employees are not disciplined or adversely affected in any way for not attending (or leaving early). Employers should not even keep or maintain such attendance records.
You can read more here.
Massachusetts: Employers with more than 50 employees must post the new veterans services poster that was just released by the Massachusett Executive Office of Labor and Workforce Development. The poster must be conspicuously displayed in an area that is accessible to all employees. You can find the poster here.
New York: Beginning March 2, 2025, all New York employers will be prohibited from requiring job applicants to provide a copy of their criminal history record, which closes a loophole employers had been exploiting to obtain such records despite restrictions regulating their access to those records.
Beginning May 8, 2025, NY employers with more than 3 employees must conspicuously post their lactation room accommodation policies and guidelines as well as the relevant state requirements both somewhere accessible by all employees and on the organization's intranet if applicable.
Beginning June 2, 2025, employers with 10 or more retail employees must have in place a written policy and training program for violence prevention measures and retail employers with 500 or more employees must install and/or maintain silent response buttons to alert authorities about emergencies. This legislation was originally slated to take effect March 4, 2025, But was amended to clarify employer responsibilities.
Further, as of January 1, 2025, New York employers are required to provide 20 hours of paid prenatal leave during a 52 week period. Also, as of the new year, the characteristics to which equal protection was extended via the New York State Human Rights Law and the resulting protections are formally enshrined in the New York State Constitution. Those characteristics include: age, disability, ethnicity, gender identity, gender expression, national origin, pregnancy, and anything else related to reproductive healthcare.
New York employers that receive criminal history records for applicants and employees must also now provide those applicants and employees with a copy of those records and a copy of the applicable New York corrections law as well as an opportunity to correct any inaccurate information that may be contained in those records.
Colorado: The City of Boulder increased the minimum wage to $15.57 ($12.55 for tipped employees) as of January 1, 2025.
Oregon: As of January 1, 2025, Paid Leave Oregon provides leave for employees completing necessary legal steps associated with adopting and/or fostering children.
You can read more here.
You can find the complete IRS 2025 benefit contribution limit list here.
As of January 1, 2025, the minimum wage for work conducted in association with federal contracts covered by Executive Order 13658 is $13.30 ($9.30 for tipped employees), while the minimum wage paid for work conducted in association with federal contracts covered by Executive Order 14026 is $17.75 per hour for both tipped and non-tipped employees.
Additional guidance about which kinds of contracts are covered by which executive order can be found here.
You can find guidance for ERISA 403(b) plan eligibility requirements for long-term, part-time employees according to the updated standards from the Secure ACT 2.0 here.
Key Takeaways:
State of the Union for US Labor Unions
As of this writing in the final week of February 2025, the outlook for organized labor over the next several years and beyond is very much up in the air.
President Trump’s nominee for Secretary of Labor Lori Chavez-DeRemer received scrutiny from both sides of the aisle last week, and her confirmation remains very much in question, with Republicans raising concerns about pro-union legislation she co-sponsored during her single term as a Congressional representative and Democrats criticizing her attempts to distance herself from her previous union support.
In the same week, however, the Acting General Counsel for the National Labor Relations Board - whose pro-union predecessor was fired as one of President Trump’s first official acts after reclaiming office - began rescinding policy memos issued under the Biden administration that provided guidance on topics ranging from non-compete agreements to the digital surveillance of employees.
Given these competing visions within the Trump administration and the Republican Party, there is a great deal of uncertainty about the future of labor unions in the US. Those questions come at a time when major, broad sweeping disruptions to the labor market due to technological advancement - especially artificial intelligence - seem more possible than maybe ever before.
In light of that uncertainty, and coinciding with President Trump’s planned State-of-the-Union-like address to a joint session of Congress next week during which he may very well provide some clarity on the approach his administration will take on labor protections and regulations, we wanted to take a closer look at labor unions as they exist in the US today, both as snapshot of the current environment for organized labor and as a benchmark to measure the success of new policies against as they are enacted and take effect.
US Labor Union Membership By the Numbers
According to the Current Population Survey, about 9.9% of all US workers ages 16 and older were members of labor unions, amounting to about 14.3 million, which is down by about 170 thousand workers from 2023 when there were a little over 14.4 million union members in the US accounting for about 10% of the labor force.
Due to the duty of fair representation, the number of US workers represented by unions is of course even larger than union membership rolls, with a little more than 16 million US workers befitting from union representation in 2024, representing about 11.1% of the workforce, which is down by about 170 thousand workers from almost 16.2 million in 2023, representing about 11.2% of the US workforce then.
Union membership in 2024 was split approximately evenly between public and private sector employees at about 7 million and 7.2 million, respectively. Because the private sector is so much larger than the public sector, however, the proportion of public sector employees who belong to a union is much greater than the proportion of private sector employees who do so.
The proportion of public sector US employees that were members of unions in 2024 was 32.2%, which essentially held steady year over year from 2023, whereas the proportion of private sector employees with union membership in 2024 was only about 5.9%, down from 6% the year before.
Almost 4 out of 10 employees on local government payrolls (38.2%) were union members in 2024, which is fairly unsurprising given union strength among police forces, educators, and firefighters, while the industries with the largest unionization rates in the private sector are utilities (18.7% union) and transportation & warehousing (15.8% union).
The lowest unionization rate among government workers belongs to federal employees, only 25.3% of which are unionized as of 2024, which is up from 25.1% in 2023 even though the number of federal employees that are union members fell by more than 130 thousand between 2023 and 2024, dropping to about 1.1 million.
In the private sector, the lowest unionization rates belong to the finance (0.8% union) and insurance industries (1.2% union), followed by the professional & technical services (1.2%) and agriculture industries (1.4% union).
Library and security & protective service workers had the highest proportion of union membership among occupations at 32.3% and 29.6%, respectively, while farm/fishing/forestry workers (1.5% union) and sales professionals (2.7% union) were the occupations with the lowest rates of unionization.
Union membership is lowest in the South and highest along the Pacific and Mid to North Atlantic coasts, with North Carolina (2.4% union), South Dakota (2.7% union), and South Carolina (2.8% union) claiming the lowest unionization rates.
Interestingly, 2 of the 3 states in which unionization was highest in 2024 were not connected to the continental US, with Hawaii and Alaska recording 26.5% and 17.7% union membership, respectively. New York (20.6% union), Connecticut (16.5%), and Washington (16.0%) had the highest unionization rates among contiguous states.
Almost 3 out of 10 union members (29%) now live in just 2 states - New York and California - which is almost double the percentage that all workers from New York and California - union and non-union alike - represent as a portion of the total US workforce (17%).
Mployer’s Take
Over the last 40 years, the proportion of the US workforce that belongs to a labor union has decreased by half - from a little more than 1 out of 5 full-time salaried US workers with union membership in 1983 to about 1 in 10 as of 2024.
During that same time, however, the actual number of union workers in the US has been reduced by a considerably smaller margin, with only about 2 million fewer union employees working in the US today than there were in the mid-1980s, accounting for only an approximate 15% decrease in total union membership over the last 4 decades.
In effect, as the US and the US worker population has grown, union workers as a proportion of the total population has decreased considerably, but union workers and union jobs have remained fairly entrenched nonetheless, even if unable to keep up with population growth and economic expansion.
If current union membership figures rely on entrenched workers, however, those workers are rapidly aging out of the workforce, and how well-protected those jobs are going forward may be put to the test sooner than later.
Just looking at the age breakdown alone paints a fairly grim picture of the future of union membership. For example, workers between the ages of 45 and 54 have the highest rate of unionization at 12.6%, while workers ages 16 to 24 claim the lowest proportional union membership at 4.3%.
That said, although unionization was much higher among full-time workers (10.7% union) compared to part-time workers (5.7% union) in 2024, the percentage of unionized full-time workers fell last year (minus 0.2%) while the unionized percentage of part-time workers increased (plus 0.5%), which is a noteworthy development. With growth in part-time employment outpacing full-time growth, unionization may have some tailwinds here.
Realistically, however, while the future head of the Department of Labor remains unknown for the time being, the current nominee is representing positions that are both more favorable toward organized labor than any potential future nominee from this administration is likely to be, but also less favorable toward organized labor and worker protections than the previous Secretary of Labor, so the trend is apparent even if the ultimate appointee is not.
Still, the advantages that unions offer to workers remain significant, perhaps most notably when comparing pay rates, with full-time, salaried union workers bringing in median annual earnings of about $70 thousand in 2024 whereas non-union members earned a little less than $60 thousand under the same conditions, which is more than 15% less.
The momentum is working against the expansion of unions and enhanced worker protections, however, and if President Trump’s first term and/or Elon Musk’s questioning of the constitutionality of the National Labor Relations Board serve as any indication, the momentum against organized labor is more likely to intensify than to subside over the next few years at least.
Key Takeaways:
The Ozempic, Semaglutide, and GLP-1 Problem For Employers
Since the Food and Drug Administration first approved semaglutide (a type of GLP-1 drug) as an injectable weight loss medication in 2021, the demand for brand name versions like Ozempic and Wegovy has skyrocketed. With skyrocketing demand has come skyrocketing prices, however, and neither the demand for these prescriptions nor their price points appear likely to come down any time soon.
Much of the demand for these drugs is a direct result of just how effective they have been, at least in the short term. What remains to be seen is how effective these medications will ultimately prove to be in reducing the incidence of tangential, obesity-related conditions in the long term, and what range of associated healthcare cost savings can be expected as a result.
This represents the central dilemma of semaglutide coverage, which is whether the uncertain future benefits justify the substantial upfront costs.
Further complicating the issue is the uncertainty surrounding future benefits. These are amplified for employers, which also have to account for turnover risk when weighing long-term investments in the health of employees who may no longer be with the organization by the time those benefits are realized.
Taken together, these factors are inspiring an increasing number of employers to rethink their approach to semaglutide coverage and how it fits into their larger organizational mission, not just in terms of their health plans but also in terms of talent attraction, retention and workforce management.
Employer Semaglutide and GLP-1 Coverage By The Numbers
According to the Kaiser Family Foundation (KFF), only about 18% of all large firms (defined here as those with 200 or more employees) offered semaglutide and/or other similar GLP-1 medications for weight loss purposes in 2024.
The proportion of employers offering these medications tends to increase as employer increases in size as well, with KFF’s data indicating that about 16% of employers that have between 200 and 999 employees offering semaglutide and/or other GLP-1 coverage for weight loss, while 24% of employers with between 1,000 and 4,999 employees cover these prescriptions, and 25% of employers that have 5,000 or more employees do so.
Data from Mercer, on the other hand, points to much more widespread adoption of GLP-1 medication for weight loss, with 44% of large employers (defined here as those with 500 or more employees) offering semaglutide and/or GLP-1 coverage in 2024 - a 3% increase up from 41% in 2023. An even larger proportion (64%) of the largest employers (defined here as those with 20,000 or more employees) covered these medications in 2024, up from 56% in 2023 representing 8% year-over-year growth.
Although these figures do not allow for an apples-to-apples comparison, they clearly represent a fairly wide coverage range, with KFF reporting much lower rates of semaglutide and GLP-1 coverage than Mercer, but this data discrepancy can perhaps be explained in part by the 31% of KFF survey respondents who stated they did not know whether their employers largest health plan covered these medications for weight loss treatment.
The International Foundation for Employee Benefit Plans (IFEBP) survey was somewhere in between KFF and Mercer, estimating that about 34% of US employers (no employee count specified) offered GLP-1 drugs for weight loss purposes in 2024, which is up 8% from 26% in 2023.
Data from the same IFEBP survey indicates that GLP-1 drug costs as a proportion of total annual claims are increasing, with GLP-1 expenses accounting for an average of 8.9% of total annual claims for US employers, up from 6.9% in the 2023 survey.
In total, 21% of employers reported that GLP-1 medications were responsible for 2% or less of total claims, while 47% of employers reported that GLP-1 medications amounted to 10% or more of total annual claims.
Rising GLP-1 Costs Lead To Health Plan Changes
Demand for these medications has led to substantial financial losses according to data released by a number of entities in the healthcare industry that are all telling very similar stories about how semaglutide and GLP-1 prescriptions for weight loss are affecting their bottom lines.
Many insurers took a GLP-1-related hit last year, for example, Blue Cross and Blue Shield of Massachusetts recorded losses amounting to nearly $115 million dollars just in the first 3 quarters of 2024, which corresponded with an approximate 250% increase in GLP-1 claims over the same period.
Hospital systems were comparably affected, for example, UPMC out of Pittsburgh posted an even larger loss of about $370 million over the same term, which it attributed to increased medical utilization and pharmacy costs, while Highmark Health - also of Pittsburgh - despite avoiding operational losses, reported a significant decline in operating gains in 2024 relative to 2023, which administrators blame on high prescription drug costs - most notably GLP-1s.
According to the Chief Pharmacy Office at UPMC, the “costs are unsustainable” due to the “explosion in demand” and many organizations are implementing additional cost controls in an attempt to suppress some of these quickly ballooning expenditures.
For insurers and care providers alike - the path forward of least resistance seems to involve increased prior authorization in the short term while the supply chain becomes better capable of meeting demand over time.
But for employers who must also take into account the role that their health plans play in terms of talent attraction and retention, controlling costs via adding additional obstacles and further limiting access to an increasingly popular weight loss option can be counterproductive and risk increased turnover.
How Are Employers Adapting?
These high cost and high demand dynamics have led to two separate trends among US employers - some employers are dropping GLP-1 coverage for weight loss and others are expanding GLP-1 coverage for weight loss, and the difference is largely driven by how one calculates and weighs the potential long-term health benefits in the cost-benefit analysis.
Even for employers betting that the potential long-term health benefits associated with GLP-1 utilizations and weight loss - including reduced risks for cardiovascular and kidney disease - will ultimately outweigh the substantial upfront costs, those rising upfront costs are becoming problematic.
In a previous piece covering semaglutide and other GLP-1 medication, we discussed some of the ways that employers are adapting in order to offer these drug treatments to employees without exposing the health plan to out-of-control costs, including implementing lifetime caps, minimum BMI caps, and limiting access to cheaper GLP-1 options:
Just as many private health insurers may come to increasingly rely on prior authorization and reduced access to these prescriptions to rein in costs, many employers may likely implement similarly tightened restrictions over the next few years.
While reducing the number of potential employees with access to these medications can be an effective safeguard against overrun expenses, it also limits how effective those health plans may be as talent retention and attraction tools.
Should the popularity of GLP-1 treatment for weight loss maintain its current trajectory, the next evolution of GLP-1 access for self-insuring employers may involve both restricted access for employees based upon qualifying criteria (e.g. BMI threshold exceeded, payment cap not exceeded, etc.) and also expanded access in the form of perks or incentives for employees who do not otherwise qualify for coverage.
What Comes Next?
Access to some GLP-1 drugs is already starting to improve as a result of pharmaceutical and insurance companies exploring new cost-saving approaches and proactively working with legislators to bring down some of these expenses.
Just a few months ago in December 2024, for example, drugmaker Eli Lilly teamed up with a telehealth platform to offer a non-semaglutide GLP-1 alternative for weight loss directly to consumers for less than half the price that Ozempic and Wegovy in many cases.
Drugmakers are also making significant headway in developing and releasing generic versions of GLP-1 medications, with the FDA approving the first 2 generic GLP-1 drugs in November and December 2024, respectively, although neither of those drugs has weight-loss-specific uses.
It will still be a while before generic semaglutide medication becomes available, as it most likely won’t hit the market for another 5 or 6 years in 2030 or 2031.
There is a $4.1 billion facility in the works where significant quantities of Ozempic and Wegovy can be manufactured, which will increase the available supply of these drugs and hopefully bring down the sticker price, but it will be at least 3 or 4 years before these products would be available.
On the public front, the Department of Health and Human Services recently added both Ozempic and Wegovy to the list of drugs covered under Medicare Part D which will be subject to price negotiations in 2025. Although these negotiations won’t directly apply to prescription prices for private buyers, they may still set a benchmark that results in lower prices across the board. Even then, the new Medicare prices and any related private market impacts won’t come to be for another 2 to 3 years in 2027 or 2028.
In short, there are a number of potential changes in the supply chain that are likely to reduce upward pressure on prices for semaglutide and GLP-1 medications in the years ahead, but that supply-side price relief may not come all at once and could even conceivably be outpaced and canceled out by upward price pressure due to growing demand.
Mployer’s Take
The effectiveness of some GLP-1 medications as a weight loss drug has been pretty clear for several years, though the long-term tangential benefits of GLP-1-assisted weight loss will likely take another 5 to 10 years, at least, to be more fully assessed. Additionally, it will likely also take 5-plus years before the GLP-1 weight loss prescription costs normalize and find their equilibrium in the market.
As a result, there is a potential 5-plus year window of uncertainty before the cost-benefit uncertainty is effectively settled. With employers currently split and trending in diverging directions around their coverage of GLP-1 for weight loss, there is an opening for employers to establish a significant advantage over competitors who approach GLP-1 coverage differently.
Given that some studies are already showing significant healthcare cost savings associated with tangential GLP weight loss benefits, however, the odds that long-term benefits exceed the short-term costs of covering GLP-1 weight loss medication seem to be going up.
For example, one study found that GLP-1 use for weight loss across approximately 2,000 patients with heart failure and/or specific cardiovascular diseases reduced annual healthcare expenditures by $7,500 to around $9,000 dollars per person.
The opportunity for those kinds of cost savings makes GLP-1 coverage seem like an easy choice for employers.
At the same time, however, it is easy to see why employers that focus on short-term costs and/or the scope of the potential demand want to severely restrict access to these medications for weight loss purposes if not eliminate coverage entirely.
That perspective is especially understandable considering that more than half of US adults could be eligible for GLP-1 use either for diabetes, obesity, or heart conditions - the overall population who may want/need access to these drugs is large enough to be cause for concern for any payer - even those as large and well-funded as the US government.
Demand calculations based on the total number of potentially eligible, qualifying candidates that could benefit from any given medication, however, are not necessarily fair reflections of demand.
One recent Morning Consult poll, for example, found that 62% of respondents claimed they would rather make a diet change than use an injectable weight loss drug in order to lose weight, and that preference was even stronger among certain demographics, including men, baby boomers, residents of the Northeastern part of the country, post-graduate degree holders, and people earning more than $100,000 annually.
People can and do change their minds, of course, and there are certainly many people who may come around to the idea of utilizing GLP-1 as the user base grows and the effectiveness of the drugs becomes more apparent.
However newfound perspectives do not often emerge in mass overnight, and the process of millions of individuals reevaluating a personal position and reversing course takes time, just as increasing the supply of these drugs takes time and just as collecting evidence on long-term cost savings takes time.
In light of those potential long-term healthcare savings and the encouraging numbers we’ve seen on that front so far, however, assuming that demand doesn’t spike in line with worst-case scenario forecasts over the next few years, the trend toward covering semaglutide and GLP-1 for weight loss purposes with some restrictions seems likely to pick up momentum barring unforeseen events.
Key Takeaways
Article - Federal Court Ruling May Put Millions of US Companies In Breach of ERISA Fiduciary Duty
A recent ruling from a Federal judge in Texas has put nearly every company in the US that offers a retirement or pension fund at risk of being sued for failing to uphold their fiduciary duties to their employees.
The core issue of the case is whether an employer can be found in violation of the Employee Retirement Income Security Act (ERISA) as a result of entrusting retirement funds to investment managers that take into account corporate environmental, social, and governance (ESG) considerations when managing those funds.
Based on this latest court ruling, much to the surprise of many legal observers, the answer to that question appears to be ‘yes, companies can be held liable for retaining retirement fund investment managers whose investment practices incorporate ESG principles’ - at least for the time being.
What remains to be seen, however, is the amount of money that the defendant company will have to pay as a result of their adjudicated infraction, which in turn is likely to have a major impact on how widespread the repercussions of this ruling will be given that a string of both appeals and copycat plaintiffs are almost certain to follow any final order front the judge that includes a substantial amount of money changing hands.
Spence v. American Airlines
The lawsuit in question was filed in the Summer of 2023 when a senior pilot with American Airlines initiated a class action lawsuit against his employer on behalf of more than 100,000 participants in a 401(k) plan offered by American Airlines.
The issue at hand stems back to an incident that occurred 2 years prior in the summer of 2021 when global investment giant Blackrock joined other major investment managers and activist investors to exercise their shareholder voting rights and elect 3 ESG-friendly board members to the 12-member ExxonMobil Board of Directors, which is an outcome ExxonMobil leadership at the time had spent months fighting to prevent.
Spence claimed that Blackrock was engaging in the pursuit of ‘non-financial ESG policy goals’ and that American Airlines was in violation of their fiduciary duty by utilizing Blackrock as investment managers for the management of those 401(k) funds.
Fiduciary Duty: Prudence & Loyalty
In accordance with ERISA, employers, and their agents - such as plan trustees, plan administrators, and members of plan investment committees - owe a fiduciary duty to act and make decisions that are in the best interests of plan beneficiaries.
This fiduciary duty encompasses many responsibilities under the law, including a responsibility to diversify investments, avoid conflicts of interest, and follow plan guidelines, but in the class action lawsuit Spence brought against his employer American Airlines, however, he alleged only violations of the fiduciary duty of prudence and the fiduciary duty of loyalty.
Interestingly, the standards and regulatory guidance for evaluating prudence and loyalty in the context of fiduciary duty have been in flux in recent years, with the Department of Labor for the then-outgoing Trump administration issuing final rules with amendments regarding the fiduciary duty of prudence and loyalty in mid-November 2020.
According to those amendments, prudence requires plan fiduciaries to make investment decisions based exclusively on “pecuniary” or financial factors. Loyalty requires that plan fiduciaries determine that potential investment alternatives are ‘economically indistinguishable’ from each other before fiduciaries can take into account potential collateral benefits beyond investment returns, in which case those collateral benefits essentially function as a tie-breaker.
In November of 2022, however, the DOL for the Biden administration issued a final rule that interpreted the fiduciary duties of prudence and loyalty in a way much more favorable to ESG considerations.
According to the Biden DOL clarifications, prudence requires decisions to be based on relevant risk and return factors with ESG being among the factors that can be rightly considered, and loyalty does not prevent plan fiduciaries from taking collateral benefits into account so long as plan alternatives equally serve the financial interests of beneficiaries over time.
While the Biden DOL’s final rule overrode the final rule issued by the Trump administration DOL in November 2020, Biden’s final rule did not take effect until January of 2023, so the Trump DOL rules were still applicable when Blackrock was among the investors that won the proxy battle against ExxonMobil in the summer of 2021.
Now that Trump has returned to the White House, it’s also worth noting that the definitions of prudence and loyalty about fiduciary duty under ERISA are likely to revert to the interpretations his previous administration issued shortly before he left office in 2020.
Where Did American Airlines Go Wrong?
In evaluating Spence’s claims against American Airlines, the judge determined that American Airlines had been prudent, but they had not been loyal.
Although Spence claimed that American Airlines had violated its duty of prudence by not directly monitoring Blackrock’s proxy voting activism and instead depending on a third party to do so, the judge ruled that the employee benefit committee at American Airlines had been prudent and exceeded industry expectations by meeting regularly with both internal and external experts to review and monitor plan performance.
As for Spence’s claim that American Airlines had breached their duty of loyalty, however, the judge determined that American Airlines was in fact in violation of the law because they failed to keep their own “corporate interests separate from their fiduciary responsibilities” which led to “an impermissible cross-pollination of interests and influence on the management of the Plan.”
The judge found that Spence provided sufficient evidence showing American Airlines was incentivized to ignore BlackRock’s shareholder activism in part because BlackRock owns both hundreds of millions of dollars worth of American Airlines stock, as well as hundreds of millions of dollars worth of American Airlines debt, which may have led American Airlines to become lax in its oversight of BlackRock’s retirement fund management practices.
In support of his finding that the duty of loyalty had been breached, the judge also cited an American Airlines employee who served both as corporate liaison to BlackRock and as a member of the American Airlines fiduciary committee and said that billions of dollars of potential loans might have been at risk if American Airlines had not followed ESG reporting protocols.
The judge further noted in support of his conclusion that the American Airlines asset management group had not requested information about BlackRock’s proxy voting, nor had American Airlines expressly asked the third-party consultant to review Blackrock’s proxy activities, nor had American Airlines received mandated reports from BlackRock about their proxy voting intentions.
Although he made clear in his judicial opinion that ESG considerations are not entirely impermissible and can be taken into account purely from a financial perspective as another factor or tool that can be utilized to help maximize long-term financial gain, the judge did not find that to be the case in this instance where BlackRock’s climate change goals seem at odds with the financial interests of ExxonMobil, whose primary area of business involves selling fossil fuels.
What Happens Next?
Recommendations as to what losses were incurred and what remedies are most available and appropriate were due from both Spence and American Airlines by the end of January, which the judge will review before ultimately deciding on damages.
Although the judge has already found American Airlines to be in breach of its duty of loyalty, the penalties assessed for their infraction will likely be very influential both on a micro and macro level and can significantly impact how widespread the impact of this decision will be.
For one, the amount of damages owed will probably play a significant part in American Airlines’ decision on whether or not to appeal the ruling in this case, which would result in drawing more attention to the lawsuit and either solidifying or overturning the ruling.
Equally if not more importantly, the severity of the remedy that the judge ultimately hands down will directly determine whether the damages awarded are sufficiently large to inspire a wave of lawsuits initiated by employees against their employers on similar grounds now that they have been validated in court.
Mployer’s Take
The potential size of the seismic quake that could come in the wake of this ruling can hardly be overstated.
That said, at this stage of the game, it is not yet certain at all that the aftershocks of this lawsuit will extend beyond the Northern District of Texas.
If the judge decides to bring his hammer down on American Airlines and requires them to pay a steep penalty, there may well be tens to hundreds of millions of plaintiffs who come out of the woodwork ready to step up and sue their employers on similar grounds.
In fact, in the inciting incident in this case, BlackRock was joined by State Street and Vanguard in electing the 3 dissident members to ExxonMobil’s board. These firms have all been ESG proponents and collectively are responsible for managing over $5 trillion in retirement assets - more than 12% of total retirement funds in the US - which could lead to tens of millions of additional plaintiffs from this one incident alone.
It’s unclear at this point just how broad this decision will ultimately prove to be beyond this particular case and proxy voting incident, however, since the judge pointed to the friction between climate change economics and fossil fuel economics as particularly at odds, and there were several clear conflicts of interest and breakdowns in communication and/or oversight on the part of both American Airlines and BlackRock, as well.
On the other hand, despite the conflicts of interest and insufficient proxy voting oversight, it remains unclear just what American Airlines was supposed to do to avoid this outcome in the first place.
Regarding the conflicts of interest, American Airlines presumably utilized BlackRock as a creditor because they provided the most favorable loan arrangements, and the airline has no control whatsoever about the equity stake in their company that any given investor like BlackRock might control at any given time.
The judge even noted in his decision that BlackRock’s significant ownership stake and outstanding debt with American Airlines “are not enough on their own to constitute disloyalty,” which seems to indicate the crux of the fiduciary duty violation is really the lack of oversight.
Even if American Airlines had been monitoring BlackRock’s ESG advocacy more closely, however, they were in no position to meaningfully influence BlackRock’s investment strategy one way or the other.
Essentially, if American Airlines violated its duty of loyalty by not monitoring BlackRock’s ESG promotion, then American Airlines would also have been in violation of its duty of loyalty just the same if it had been monitoring BlackRock’s proxy voting and had continued utilizing its retirement investment services anyway, so what choice did American Airlines have except to find a different investment manager that did not incorporate ESG into their investment decision-making process?
Regardless of how this case proceeds, one central takeaway from this situation is that employers would be wise to minimize conflicts of interest with retirement fund investment managers wherever possible, in addition to maximizing communication and oversight reporting with internal and external auditors.
The question as to what standards and by what measures employers are expected to hold retirement investment fund managers to account, however, especially about ESG-related issues, may not be adequately addressed, let alone answered, until long after this case reaches its final resolution.
It is still very possible, even after the judge’s finding that American Airlines breached their fiduciary duty to their employees that this case will ultimately conclude relatively quietly. If this ruling is upheld and reinforced in follow-up cases, however, it may simply be the end of ESG investing or we may very well be on the cusp of experiencing a sea-change-like shift in the employee benefits management industry.
Editor's Note: This report is based on survey data from January 2025 that was published in February 2025. This is the most recent data available. (Source: Bureau of Labor Statistics)
US employers added 143 thousand jobs last month, which fell a bit short from the almost 170 thousand that economists were forecasting.
At the same time, the national unemployment rate average ticked down by one-tenth of a point to 4% for the first time since May of 2024.
Beyond the slight movement in unemployment rate and increase in payroll figures, however, the labor market showed little movement whatsoever, with no significant change in labor force participation rate (62.6%) or in the number of people working part-time but who want full-time work (4.5 million).
There was similarly little movement among the long-term unemployed (1.4 million) or the number of people who want a job but haven’t actively looked for one in the last 4 weeks (5.5 million) - only a relatively small portion of which had actively sought work in the last year (1.6 million) - all of which held steady from month to month.
Although the fewer than 150 thousand net jobs added across the US last month is down substantially from the more than 250 thousand net jobs recorded the month before, there were several industries that performed in line with expectations.
The healthcare industry reported the largest net increase in jobs last month with plus 44 thousand, which is slightly below the 55 thousand healthcare jobs averaged each month in 2024.
The retail industry had the next largest net job increase with plus 34 thousand, followed by government jobs at plus 32 thousand, then the social assistance industry, which grew by 22 thousand payroll entries.
Mining was the only industry that saw a net job loss over the month (minus 8,000), while the remainder of industries remained essentially unchanged, including the construction industry, the manufacturing industry, the wholesale trade, the information industry, the transportation and warehousing industry, the leisure and hospitality industry, the professional and business services industry, and the financial activities industry.
Average hourly pay rose by about 17 cents to $35.87 per hour (an increase of 0.5%), while the average workweek length fell slightly to 34.1 hours per week.
This BLS report contains the final batch of data collected under the Biden administration, which saw the US unemployment rate drop by 2.2% under its watch, down from 6.2% in February of 2021 to 4% as of January 2025.
This report also marks the 49th consecutive month of net job gains, which is the second longest streak of positive job growth since these numbers have been tracked.
In fact, the only longer period of consecutive job growth in recorded US history occurred between October of 2010 and February of 2020, just as the pandemic was ramping up in the US, and were it not for the COVID employment dip which was accompanied by a historically quick recovery, the current ongoing streak of job growth and the last would be almost 4 times longer than the next longest streak.
Given that the 5th longest streak is 44 consecutive months of job growth, even getting to 40 consecutive months of growth is historically noteworthy and hitting 50 or more months of job growth has only happened once before, about 10 years ago. If the US maintains its current trajectory and achieves positive job growth again next month, that will be the second occurrence ever of more than 50 consecutive months of job growth, and those streaks have essentially occurred back to back.
All that to say, while the current job growth streak is not exactly unprecedented, it's pretty close and the streak does become more of an outlier with each passing month.
With the transfer of power comes questions about how trade agreement negotiations and immigration policy orders will ultimately play out, for example, and those outcomes will affect labor and employment issues both directly and indirectly.
While those outcomes remain to be seen, however, the uncertainty itself can in many cases have a negative drag on economic views, perhaps as evidenced in the notable downturn in consumer sentiment of late, but it’s likely that sentiment will rise or fall with economic performance, and those numbers will start coming in next month.
Check out the Mployer blog here.
Key Takeaways
Article: Are Centers of Excellence On the Decline?
The proportion of employers offering employee health plans that utilize Centers of Excellence may have hit its high water mark and begun to recede among the nation’s largest employers.
Centers of Excellence have been an increasingly prominent component of employer-sponsored health plans since they were first introduced in 2014. Still, after 10 years of largely consistent growth, the tide may be turning.
Centers of Excellence: By The Numbers
In the US in 2024, about 19% of all employers that have 200 or more employees and provide health benefits offered access to some form of Center of Excellence program to their employees.
That number has essentially remained unchanged at 19% year-over-year from 2023 for all US employers that provide health benefits and have 200 or more employees, which indicates that the Center of Excellence adoption growth has stalled at the macro level across all large employers within this range.
What’s more interesting, however, is noting how Center of Excellence participation has changed from 2023 to 2024 when breaking down the large employer into smaller demographic subsets, which reveals a less optimistic vision for the future of Center of Excellence program growth.
From 2023 to 2024, among employers that offer health benefits, for example, the smallest subset of large employers - those with between 200 and 999 employees - increased from about 15% that had incorporated Centers of Excellence into their offerings in some way as of 2023, to 16% who have done so as of the 2024 data.
While that change reflects a relatively small increase in proportion, employers with between 200 and 999 employees are also the largest subset of large employers, so even a small increase in participation percentage indicates a significant number of employers incorporating new Centers of Excellence options into their health plan offerings that they did not provide the year before.
That said, the Center of Excellence adoption trendline is moving in the opposite direction for employers with between 1,000 and 4,999 employees, as well as for employers with 5,000 or more employees on their payrolls.
In 2023 among employers that offer health benefits and have between 1,000 and 4,999 employees, about 31% offered Center of Excellence programs for at least some conditions and/or procedures. By 2024, however, that percentage had shrunk to 29%.
The Center of Excellence participation slide was even more pronounced in firms that offer health benefits to their 5,000 or more employees, which decreased from 45% to 39% in a massive 6% year-over-year drop.
In this light, while Center of Excellence programs among health-benefit-offering employers may look stable across large employers with 200 or more employees as a whole, a small percentage gain among the subset of large employers that have the largest number of employers is offsetting more substantial participation loss among employers with 1000 or more employees.
Given that larger employers often have a disproportionate impact in shaping workplace trends and workforce expectations, Center of Excellence supporters and proponents seem to be losing ground in the most influential places, which does not bode well for these trends to turn around in the near future.
Centers of Excellence: Background
It’s been 11 years since 8 self-insured employers joined forces to establish the Employer Center of Excellence Network (ECEN), which has served as both a catalyst and model for the proliferation of Centers of Excellence since.
The plan was relatively simple: the group would identify and contract with a few select surgeons and hospitals throughout the country that could provide the highest quality of care at the lowest price for a few select, voluntary medical procedures.
By collaborating with other large healthcare purchasers and collectively funneling to those centers of excellence as many as possible of their employees who were seeking those select procedures, these employers realized they could create a situation that is mutually beneficial for all parties involved.
The doctors and hospitals obtain a pipeline of business that allows greater specialization and potential cost savings on the supply side of the healthcare equation, meanwhile, patients receive top-notch, specialized care at a bulk discount rate.
Employers, in turn, get lower and more consistent front-end costs on the procedure sticker price, as well as additional cost reduction on the back end from more consistent patient outcomes and fewer negative patient outcomes due to care provided by less specialized or skilled medical practitioners.
When the ECEN first launched in 2014, the group of select procedures was limited to just knee and hip replacement surgeries, but the group has since expanded to include a number of other conditions that can benefit from the model, including spinal procedures, cancer treatments, and organ transplants, for example.
How Do Centers for Excellence Reduce Costs?
The main benefit that Centers of Excellence provide to employers may be consistency, which is advantageous for employers on a few different fronts:
One study from Rand Corporation indicated that the Centers of Excellence they evaluated had reduced total costs for employers associated with the relevant procedures by more than 10% (cost savings per procedure averaged more than $16 thousand).
Patients saw even greater cost savings at almost 30% through reduced or removed copayments, which is an incentive many employers offer to encourage Centers of Excellence utilization.
Both patients and employers benefited from a readmission rate that was about 75% lower than the national average, as well.
Centers of Excellence: Flexibility vs. Rigidity
Even though the patient outcomes and reduced costs have served as effective positive incentive tools on their own to encourage employees to seek out Centers of Excellence for covered services, a significant proportion of employers see enough upside in Centers for Excellence programs that they supplement those incentives with additional sticks and/or carrots.
With regard to negative feedback and sticks, nearly 1 in 5 large employers that utilize Centers of Excellence programs require its employees to use those Centers for certain procedures without providing an alternative employer-sponsored option.
The larger the employer, the more likely the employer is to mandate Center of Excellence use, with only 14% of employers with between 200 and 999 employees requiring Center of Excellence utilization for prescribed conditions, while 27% of employers with between 1,000 and 4,999 employees and 31% of employers with 5,000 or more employees did so.
As for additional positive feedback and carrots to incentivize employees to take advantage of these programs beyond reduced costs, positive patient outcomes, and low readmission rates, a large number of employers also cover travel expenses that employees incur when visiting Centers of Excellence.
In 2024, 24% of employers with between 200 and 999 employees covered travel expenses for employees to seek care at Centers of Excellence, 25% of employers with between 1,000 and 4,999 covered these employee travel expenses, and 46% of employers with 5,000 or more employees covered them.
Mployer’s Take
It is entirely possible that the dip in Center of Excellence utilization among the largest employers in the US last year was anomalous and not indicative of these programs falling out of favor at the top of America’s most influential private organizations.
It’s also possible that covering travel expenses became increasingly expensive for employers as covered procedures evolved from relatively fast procedures with relatively short on-site recovery times, like hip and knee replacements, to more invasive procedures with longer recovery times, like organ transplants, and treatments that themselves are more complex and long-term, like certain cancer treatment regimens.
Whatever the case may be, it must be somewhat troubling for Centers of Excellence advocates to see the most pronounced reduction in utilization among the largest employers, however, given that Center of Excellence programs seem most aptly suited to the biggest organizations who can negotiate low fees, provide steady streams of patients from many corners of the country, and take advantage of these potential cost savings.
That said, because Centers for Excellence are such a relatively recent addition to the employer cost-saving repertoire, there is still a process of trial and error that is happening which may result in some fluctuation in participation percentages but will hopefully ultimately lead to greater efficiencies and a more streamlined menu of services that best work in Centers of Excellence models.
In the meantime, as those issues and efficiencies get sorted out, Centers of Excellence are likely to remain a prominent component of health benefits service delivery for the foreseeable future, and we’ll keep an eye on these utilization trend lines as they continue to take shape and organizations figure out how to best optimize these programs.
Each month, Mployer collects and presents some of the most relevant and most pressing recent changes in law, compliance, and policy in areas related to employee benefits, health care, and human resources.
From February 1st to April 30th, non-exempt (low hazard) employers who had at least 11 employees at some point in 2024 must post in a conspicuous place a copy of OSHA Form 300A, Summary of Work-Related Illness and Injury, certified by a company executive.
For non-exempt employers that had 250 or more employees at some point last year and employers with 20 or more employees in specified high risk industries, OSHA requires electronic submissions, which are due by March 2nd, 2025.
You can find the electronic submission platform here.
In his first days since returning to office, President Trump has signed a series of executive orders dealing with labor and employment issues for federal employees and federal contractors, with more expected still to come.
While thus far these orders don’t apply to private employers in general - with the exception of those that accept federal funds and/or are federal contractors - these orders will not only affect a sizeable portion of the workforce directly, but they will also likely inspire some private employers to modify their practices and follow the example set by the executive branch.
The new rule that will most likely have the largest impact beyond the sphere of federal employees is Executive Order 11246, which makes it so that federal contractors no longer have to practice affirmative action in the hiring process for most protected classes. The only protected classes excepted from the order are veterans and individuals with disabilities, for whom affirmative action standards still apply.
Although federal contractors will no longer be required to maintain affirmative action programs, Title VII of the Civil Rights Act remains in effect to prevent discrimination against protected classes like race, gender, sexual orientation, and national identity.
You can read more here
A Federal District Court Judge in Northern Texas ruled that American Airlines had breached its fiduciary duty by working with an investment manager that promoted ESG practices in a way that ran counter to the economic interests of the employee retirement fund beneficiaries.
The repercussions of this ruling could be industry-reshaping if upheld, although there were many additional conflicts of interest between American Airlines and their investment fund manager that may limit how broadly applicable the ruling will ultimately prove to be.
The judge has already found American Airlines in breach of their fiduciary duty, but he has yet to assess damages, which will influence the probability of appeal and the likelihood of copycat cases.
You can read more about this case here.
As of January 13, 2025, the extension period for certain renewal Employee Authorization Document (EAD) applications filed on May 4, 2022 or later has been formalized at 540 days.
You can read more here.
As of January 1, 2025, the IRS mileage reimbursement rate for road miles driven for business purposes increased by 3 cents per mile from 67 to 70 cents per mile driven.
The IRS released a statement announcing a 25-cent increase in Patient-Centered Outcomes Research Institute fees for covered plan years ending on or after October 1, 2024, and before October 1, 2025.
The new fee is $3.47 per covered life.
You can read more here.
In response to a Federal Court of Appeals Decision that vacated the so-called 80/20/30 rule that was instituted in 2021, the Department of Labor officially reverted to the previous tip credit rule.
You can read more here.
In the last weeks of 2024, the Paperwork Burden Reduction Act and the Employer Reporting Improvement Act both became law.
The former will provide an alternative means for employers to distribute forms 1095-B and 1095-C to employees, and the latter extends the time employers have to respond to IRS notice of audit 226-J forms from 30 days to 90 days.
In 2025, the threshold for what qualifies as affordable coverage also increases from 8.39% to 9.02%, which means that an employee’s required contribution to the plan can be no more than 9.02% of their salary in order for the plan to be considered affordable and to avoid potentially paying the penalty.
You can read more about the affordability threshold here.
A federal court in Texas determined that the Department of Labor exceeded its authority last summer by increasing the minimum pay thresholds for employees to qualify under the executive, administrative, and professional and highly-compensated employee exceptions to minimum wage and overtime protections.
Those minimum pay thresholds have reverted to their prior levels - back to $684 per week for the EAP exemption (down from $844 per week under the now defunct rule), and back to $107,432 per year for the HCE exemption (down from $132,964 per year under the now defunct rule).
New York: Beginning March 4th, employers with 10 or more retail employees must have in place a written policy and training program for violence prevention measures.
Further, as of January 1, 2025, New York employers are required to provide 20 hours of paid prenatal leave during a 52 week period. Also, as of the new year, the characteristics to which equal protection was extended via the New York State Human Rights Law and the resulting protections are formally enshrined in the New York State Constitution. Those characteristics include: age, disability, ethnicity, gender identity, gender expression, national origin, pregnancy, and anything else related to reproductive healthcare.
New York employers that receive criminal history records for applicants and employees must also now provide those applicants and employees with a copy of those records and a copy of the applicable New York corrections law as well as an opportunity to correct any inaccurate information that may be contained in those records.
Colorado: The City of Boulder increased the minimum wage to $15.57 ($12.55 for tipped employees) as of January 1, 2025.
Oregon: As of January 1, 2025, Paid Leave Oregon provides leave for employees completing necessary legal steps associated with adopting and/or fostering children.
You can read more here.
You can find the complete IRS 2025 benefit contribution limit list here.
As of January 1, 2025, the minimum wage for work conducted in association with federal contracts covered by Executive Order 13658 is $13.30 ($9.30 for tipped employees), while the minimum wage paid for work conducted in association with federal contracts covered by Executive Order 14026 is $17.75 per hour for both tipped and non-tipped employees.
Additional guidance about which kinds of contracts are covered by which executive order can be found here.
You can find guidance for ERISA 403(b) plan eligibility requirements for long-term, part-time employees according to the updated standards from the Secure ACT 2.0 here.
Large employers with an average of 50 or more full-time employees or the equivalent are required to either offer employees minimal, affordable health coverage or they must pay a penalty in the event that an employee secures health coverage with a premium tax credit via the exchanges.
In 2025, the threshold for what qualifies as affordable coverage increases from 8.39% to 9.02%, which means that an employee’s required contribution to the plan can be no more than 9.02% of their salary in order for the plan to be considered affordable, which allows employers to avoid potentially paying the penalty.
You can read more about the affordability threshold here.
Key Takeaways:
Article: Is Remote Work More or Less Productive Than On-Site Work?
There is little debate about the significance that the COVID-19 pandemic has had in terms of enabling the rise of remote work and reshaping both the workplace and worker expectations as a result.
There is considerably more debate, however, about the impacts that remote and hybrid work have on worker productivity.
While attempts over the last few years to quantify change in productivity due to remote work have yielded mixed results, the Bureau of Labor Statistics recently published what appears to be the most comprehensive analysis of productivity as it relates to remote work yet, which yielded some very interesting insights about more than just remote worker productivity.
The Big Question: How Does Remote Work Productivity Compare to On-Site Work Productivity
The simplest answer to the question of whether or not remote work is more, less, or equally as productive as on-site work is that remote work is on average more productive than on-site work.
As is often the case, however, the simplest answer is not necessarily the most helpful or accurate one. There are a number of different factors that can influence whether remote work is more or less productive than on-site work, including industry type and size, as well as less easily generalized factors such as off-site working conditions, which can vary from one employee to the next.
How remote work is defined as well as how productivity is measured are also crucial considerations that can significantly affect whether remote work is more, less, or comparably productive.
The Rise of Remote Work Across Major Industries
Remote work predates the pandemic, of course, and in fact about 6.5% of private sector workers in the US were already working remotely in 2019.
With the implementation of social distancing policies as the Pandemic spread across the US in the spring of 2020, remote work saw a dramatic upswing in many sectors, with some industries seeing more than 30% increases in the proportion of their workforces that are working remotely.
For the following analysis, the term remote work encompasses both fully remote work and hybrid work arrangements where the majority of work is done off-site.
Remote work rose across all industries in the first years of the pandemic. Although the proportion of employees working remotely fell some as social distancing policies at the workplace expired, remote work still remains above 2019 levels in all industries except the agriculture, forestry, fishing, and hunting industry. This, however, is in part because that industry had one of the top 5 largest remote participation rates among industries even before the pandemic.
Although remote work participation increased across almost all industries into the early post-pandemic years, that increase has not been equally distributed, and some industries have seen much more substantial increases in remote work than others.
In 2019, there were only 5 industries with more than 10% of their workforces working remotely - professional, science, and technical services (16.5%); information (11.4%); finance and insurance (10.5%); real estate rental and leasing (12.4%); and agriculture, forestry, fishing, and hunting (13.6%).
By the end of 2022, however, more than 75% of major industries had at least 10% of their workforce working remotely.
In fact, as of the most recent data collection, there were only 5 major industries with less than 10% remote participation: retail (9.4%); mining (7.2%); construction (7.8%); food services (4.8%); and transportation and warehousing (8.8%).
At the same time, there are 4 major industries with more than 30% remote work participation, including 1 with more than 40%: information (38.8%); finance and insurance (37.6%); management of companies (33.0%); and professional, scientific, and technical services (41.4%).
Measuring Remote Work Productivity
While different firms have attempted to use a range of different metrics by which to evaluate remote work productivity, including emails sent, managerial performance reviews, and phone calls logged per hour for example, for the purposes of this analysis, productivity is measured by Total Factor Productivity (TFP).
TFP is calculated by dividing worker output by all the inputs that go into producing that output, which provides a more comprehensive and dynamic understanding of productivity as a function of the varied costs that facilitate production.
For example, TFP takes into account not only the reduced labor costs that can accompany remote work due to remote workers accepting lower wages in exchange for flexibility or because they live somewhere with a lower cost of living, but TFP also takes into account other inputs that can change as a result of remote work, such as reduced office space, utility usage, turnover/recruiting service needs, and on-site/local perks and benefits expenses per employee.
How Industry Type and Size Impact Remote Work Productivity
Industry Type
Each industry has its own set of challenges and opportunities when it comes to implementing remote work, and not all industries have been equally proactive in embracing remote work and/or capturing the maximum productivity/value from remote operational structures.
In that light, it does not necessarily follow that industries with higher TFP scores are better suited for remote work while industries with lower TFP scores are less well suited because the circumstances involved within each industry and how each has approached remote work can be radically different.
That said, some industries have certainly fared much better than others when it comes to retaining and increasing productivity output relative to input via remote work.
Some of the industries with the highest TFP ratio, indicating the greatest year-over-year growth in net output over input as remote work quickly escalated during the pandemic, include data processing, internet publishing, and other information services; funds, trusts, and other financial vehicles; publishing; rental and leasing; and chemical products.
Some of the industries with the lowest (negative) TFP ratios, indicating a loss of productivity correlated with the rise of remote work, include air transportation; oil and gas extraction; metal products; and performing arts, museums, spectator sports, and related activities.
The industries with the largest productivity gains as remote work rose during the pandemic were funds, trusts, and other financial vehicles; data processing, internet publishing, and other information services; computer system design and related services; and publishing services including software.
The only industries to record decreasing remote work productivity during the pandemic as measured by TFP are securities, commodities contracts, and other financial investments; insurance carriers and related activities; and broadcast and telecommunications.
Industry Size
Productivity gains must also be considered in light of industry size, with relatively smaller industries seeing more extreme productivity swings than relatively larger industries.
Some of the larger industries that recorded remote-work-induced productivity gains include construction; real estate; miscellaneous professional, scientific, and technical services; and federal reserve banks, credit intermediation, and related activities.
Some of the larger industries that experienced a net decrease in productivity because of remote work’s rapid adoption are retail; wholesale; broadcasting and telecommunications; insurance carriers and related activities; and ambulatory healthcare services.
In total, across the 61 industries that were analyzed, on average each 1% increase in remote work participation resulted in a 0.08% increase in TFP.
Mployer’s Take
With 7 out of the top 10 industries that recorded the largest increases in remote work during the pandemic all correspondingly increasing their output by a larger margin than their input costs, the correlation between remote work and increased productivity is clear.
That said, remote work is not a one-size-fits-all solution for every given job function or private organization let alone any/every industry.
Certain industries - especially those heavily involving tech, data, publishing, and professional and scientific services - seem to be particularly well-suited for remote working arrangements, while other industries with a disproportionately large number of location-specific jobs like retail, mining, transportation & warehousing, and construction, are less well-suited in general.
That said, within nearly every organization regardless of industry there are jobs that are primed for remote work, even if not every organization in every industry is equally prepared to capture the same value and productivity from remote arrangements where applicable.
Despite the growing evidence of the productivity benefits associated with remote work, however, many organizations may move away from and/or downsize remote programs in the coming years, especially if the job market shifts in favor of employers as it is likely to do.
Larger and older organizations with more established managerial structures may choose to bring employees back to on-site work for a variety of reasons such as fostering collaboration, justifying commercial real estate expenses, and encouraging voluntary turnover in line with planned reductions in the organization’s payroll.
Still, because remote work is most effectively utilized by smaller, more tech-heavy organizations, new market entrants will increasingly rely on remote work to capture the productivity benefits and gain an advantage over the entrenched players in their markets.
As a result, remote work is likely to see an upward trajectory over the long term as successful remote-friendly new entrants grow and absorb an increasing share of the market, but the short-term prospects for remote work growth remain uncertain and may be linked to the greater economy and job market.
As this analysis makes clear, however, on average, remote work is more productive than on-site work, and organizations that are best able to capture that value regardless of industry or organizational size/type can obtain and/or maintain a meaningful advantage over their competition.
Editor's Note: This report is based on survey data from December 2024 that was published in January 2025. This is the most recent data available. (Source: Bureau of Labor Statistics)
Despite the expectation-exceeding quarter of a million net jobs added last month across the US, unemployment actually increased in 6 states and only decreased in 2 states, with the remaining 42 states and Washington DC showing no significant movement in either direction.
Payroll figures were even more steady month-to-month, with 48 states and DC seeing almost no change in payroll during December while only 2 states saw a net increase in payroll figures.
Below is the breakdown of the Bureau of Labor Statistics’ (BLS) market employment summary for January 2025.
Nevada had the highest unemployment rate for the second consecutive month, holding steady at 5.7%, followed by California and Washington DC at 5.5%, Kentucky and Illinois at 5.2%, and Michigan at 5.0% unemployment.
All other states have unemployment rates that are at or below the national average of 4.1%
Mississippi and Alabama had the largest jumps in unemployment rate last month - both climbing from 3.1% to 3.3%. Colorado, Maine, Massachusetts, and Pennsylvania each saw their state unemployment rate climb by 0.1%, as well.
Over the last year, 28 states in total have recorded an increase in unemployment rate, with the steepest rises occurring in South Carolina (1.7%), Rhode Island (1.2%), Colorado (1.1%), and Indiana and Kansas at 1.1% each.
South Dakota has maintained the lowest unemployment rate in the country for the last 12 months in a row, staying consistently at 1.9% unemployment for the last 3 months.
Vermont has the next lowest unemployment rate at 2.4% followed by North Dakota at 2.5%.
In total, 21 states have employment rates below the US average of 4.1%.
Only 2 states recorded a decrease in unemployment over the last month - Minnesota, which saw its unemployment rate drop from 5.5% to 5.3%, and Montana, which saw its unemployment rate fall by 0.1% from 3.2% to 3.1%.
Over the last 12 months, 6 states in total have seen net unemployment rate reductions, led by Connecticut, which saw its unemployment rate decrease by 1.2% over the year, followed by Wisconsin and Arizona at minus 0.4% each.
No state recorded net job losses over the last month or the last year.
Texas and Missouri were the only states that had a net increase in payroll last month, adding about 37 thousand and 11 thousand jobs respectively.
Over the last year, 33 states have seen an increase in their payroll figures, with Texas and California reporting the largest number of net jobs added while Idaho had the largest percentage increase in payroll figures at plus 3.6%, followed by Missouri and South Carolina at 2.8% each.
Despite the downtick in the unemployment rate and huge over-performance of jobs reflected in this month’s Employment Situation release, there was relatively little evidence of those gains seen in the states, which were a model of stability nearly across the board.
Data from different labor surveys can and will often lead to results that don’t necessarily align, and that appears to be the case here.
Next month might provide some additional context that may help better interpret the disconnect between employment reports showing growth and those showing stability, but next month’s report will cover data collected on both sides of the transition from one session of Congress and one presidential administration to the next.
Whether there is much insight yet to be obtained about economic data at the close of the previous term will quickly become overshadowed by the potential economic implications of new policies that are proposed and enacted over these first few months of 2025.
With a flurry of activity both at the federal and state level already, including both legislation and executive orders that carry significant economic implications, that’s where we’ll be keeping an eye out in the months ahead as the economic and workforce impacts take shape.
Looking for more exclusive content? Check out the Mployer blog.
Key Takeaways
The Employers’ Guide To The H-1B Visa Debate
Despite having Republican’s sweep the November elections and win control of not only the White House, but also both chambers of Congress in Washington DC, a stark divide within the party emerged on the issue of H-1B Visas prior to taking formal control of the federal government.
On one side of the debate, head of the Department of Government Efficiency and advisor to the incoming president Elon Musk has taken a strong stance in favor of the H-1B visa program, which has resulted in considerable pushback from a significant portion of President Trump’s MAGA voter base.
In response to the growing debate, President Trump sided with Musk in support of H-1B visas, which seemed effective at preventing the dispute from escalating further, but it remains to be seen if/how that ideological division between MAGA leadership and the MAGA movement will impact H-1B policy going forward as actual legislation and regulation are put on the table in the coming months.
In light of the uncertainty about the fate of the program in the future, we thought it would be worth taking a look at H-1B visas to get a better understanding of the size of the program, the scope of impact that potential that could result from any proposed changes, and what industries and organizations are likely to bear the brunt of the potential impacts.
H-1B Visa Program Background
The H-1B visa program launched in 1990 as a means for employers to obtain temporary work visas for highly skilled foreign professionals who work in ‘specialty occupations’ - often requiring a college degree or higher and specialized, relevant skills - or as fashion models of distinguished skill.
While the program has evolved some over the years, for the last 2 decades the number of H-1B visas issued each year has been statutorily capped at 65,000 for standard H-1B visas plus an additional 20,000 for applicants with a master's degree or higher obtained from a US college or university.
H-1B visas are distributed via a lottery system and last for a duration of 3 years, although applicants frequently seek and are granted extensions beyond their initial term for a maximum of 6 years, after which time the applicant will need to reapply and obtain a new H-1B visa or the visa-holder must leave the country.
The H-1B Debate
The central question in the debate over H-1B visas is whether or not the H-1B program provides US companies with the talent necessary to keep ahead of and/or keep up with global competitors, or whether the H-1B visa program effectively suppresses wages for US workers by enabling US companies to access specialized labor at a discounted price.
In defense of the H-1B visa, Musk credited the H-1B program as the reason he’s in America, and he said it is responsible for bringing in so many critical people who helped build companies that made America strong.
Opponents of the H-1B visa program often concede that the program can serve a valid purpose in a relatively small portion of cases where a person with unique or rare skills, abilities, and experience must be recruited from outside the US.
In practice, however, opponents argue that the program is primarily used to recruit foreign workers with qualifications that are readily available among the US workforce but who are willing to accept lower wages in order to obtain a US visa, which works against the interests of similarly skilled US workers.
H-1B Visas By The Numbers
There are approximately 600 to 700 thousand foreign workers operating in the US under H-1B visas, but the H-1B visa-holding population tends to fluctuate cyclically.
The low point for the H-1B holders population comes at the end of each fiscal year when some foreign workers begin leaving the country to pursue new opportunities outside of the US before their visas expire, meanwhile, the annual H-1B cap has already been hit so no new foreign workers can replace them until the beginning of the next fiscal year, as depicted in the chart below.
Last year, employers submitted more than 850 thousand applications for H-1B visas, which is more than 10 times the 85,000 annual cap for new H-1B visas, so the demand for these specialized foreign workers among US companies significantly outpaces the available supply.
Demand for these visas among foreign workers is strong , with workers from India and to a lesser degree China accounting for the vast majority of H-1B visa-holders. For example, in 2023, 76% of H-1B visas were issued to workers from India, with the next largest proportion going to Chinese applicants (12%). Men also tend to be disproportionately represented, accounting for 71% of successful H-1B applicants in that same dataset.
The average salary for H-1B visa holders is just under $120,000 per year as of 2024, which is up slightly from about $115,000per year in 2023. As of the most recent data available, about 75% or 3 out of 4 jobs filled by H-1B visa-holders last year paid $150,000or less.
H-1B applications tend to be concentrated in computer science, IT, and/or finance-related work across a relatively limited range of industries, with a handful of tech companies dominating the H-1B lottery, followed by accounting/auditing firms, universities, investment banks, and consultancies.
Mployer’s Take
In the recent H-1B debate, both sides are right in a sense.
The H-1B program has been bringing top (largely tech) talent to the US since the days when the internet was coming through the phone lines, and that talent certainly contributed to building the global digital infrastructure that we’ve come to know today.
It’s also clear that the size of the tech industry where H-1B holders have largely landed and the demand for tech talent in general has grown much faster over the years than the number of H-1B visa holders available to fill that growing demand, so the impact of H-1B visas on the US tech labor force has actually shrunk over most of the last 35 years.
On the other hand, with potentially fewer than 6 million tech workers currently employed in the US, if 75% of H-1B visa-holders are doing or supporting tech work, that could account for almost 10% of jobs in the space and would drive down wages for US tech workers enough to validate their opposition to the program.
Given both Musk and Trump’s stated support, along with significant bipartisan endorsement, the H-1B program does not appear to be going anywhere anytime soon., Even if the program were significantly pared down, the resulting impact on wages would be negligible everywhere outside the tech industry.
That said, the impact of significantly reducing the H-1B program on US tech worker wages could be meaningful, and that is especially true when the tech industry is in a state of contraction itself.
Still, expansion of the H-1B program seems more likely than reduction, but in light of the pushback against H-1Bs we’ve seen from the Republican voter bloc over the last couple of months, any expansion that may be trial-ballooned is unlikely to bring the program back to anywhere near the level of influence it had on the tech industry in eras past.
Under business-as-usual circumstances, the H-1B program would carry on operating undisturbed just as it has for most of the past 20 years and the recent debate would be replaced by another that is just as soon forgotten, but with would-be agents of change like Musk bringing the issue to the spotlight, it is impossible to count out the possibility that the H-1B program could see a massive overhaul of one sort or another in the near future.
If expansion of the H-1B program is proposed in the next few years, it seems a strong possibility that it would be coupled with some kind of accompanying US technical skill training program to help offset any blowback from the base.
Regardless of how the H-1B program is managed over the next 4 years, however, the only real certainty is that the demand for these types of visas will remain strong among employers for as long as they are available, and that demand will likely continue to outpace the supply.
Editor's Note: This report is based on survey data from December 2024 that was published in January 2025. This is the most recent data available. (Source: Bureau of Labor Statistics)
US employers added about 256 thousand jobs last month, which exceeded economists predictions of about 150 thousand jobs by nearly 79%.
The national unemployment dropping to 4.1% also bet forecasts, which were predicting the national unemployment rate from holding steady at 4.2%.
The number of people who permanently lost their job last month was down significantly from the month prior as well, down from almost 1.9 million people in November prior to 1.7 million as of the latest report.
There wasn’t much change in terms of the number of long-term unemployed and the labor force participation rate, which held steady at 1.6 million and 62.5%, respectively.
People working part time due to economic reasons (4.4 million) and people who want a job but haven’t looked for one in the last 4 weeks (5.5 million) also was similarly unchanged over the month, as was the 1.6 million people who are categorized as marginally attached to the workforce, meaning they want a job and had looked for one at some point in the past 12 months but had not done so in the past 4 weeks.
Of the net 256 thousand net new payroll entries over the course of December, the healthcare industry was responsible for the largest portion at 46 thousand new jobs, with the retail industry close behind at 45 thousand net new jobs after suffering a net job loss in November’ report.
About 33 thousand and 23 thousand government and social assistance jobs were added last month, as well, while most of the remaining industries saw little change in payroll figures during the month, including leisure & hospitality, natural resource extraction, construction, manufacturing, wholesale trade, information, financial activities, and professional and business services as well as other services.
Average hourly pay continued rising, this time by about 10 cents to $35.69 per hour (an increase of 0.3%), while the average workweek held steady at 34.3 hours per week.
This latest employment report marks the second consecutive month of job growth that far outpaces expectations, but those two strong months come on the heels of an especially weak one in October.
Still, given that strikes, natural disasters, and related data collection issues were significantly responsible for the down month, the two latest strong months look all the better by comparison.
The recent job market strength, however, bolsters the Federal Reserve’s case for delaying additional rate cuts and makes it very unlikely that we’ll see any rate cuts over the next several months, especially in light of uncertainty about whether the incoming Trump administration will follow through with tariffs and if so, how broadly impactful they may be, which the Fed will monitor closely in relation to any inflationary pressure the tariffs may cause.
While we won’t know much more about how the months and years ahead are primed to play out until power formally changes hands, it’s worth taking a look at some of the milestones from the past year as we wrap up some of the last data points from 2024.
Over the last year, US payrolls have increased by 2.2 million, for an average monthly net job gain of 186 thousand. Unemployment is up three-tenths of a point from a year ago, while average hourly wages are up almost 4%.
Other than comparing last year to 2023, when more than 3 million net jobs were added for an average monthly increase of more than a quarter million, it is hard to look at the 2024 numbers and not be impressed at the strength and resiliency of the labor market and economy generally throughout the year.
With the new year comes new data, new milestones to mark, and in this case, new policies that will shape the labor market and economy going forward for years to come, but overperformance has become the new normal over the past several years, even when plenty of economists were expecting economic downturn, and overperformance is almost certainly unsustainable in the long run as expectations adjust to correct for previous errors.
We would be lucky to keep up the streak, to be sure, but regardless, we will continue keeping an eye on the labor market and economy as new developments come about.
Check out the Mployer blog here.
Key Takeaways
ARTICLE I Do Your Employee Benefits Make The Grade?
We are thrilled to announce the launch of Insights+, a first-of-its-kind solution that helps employers understand exactly how their benefits compare to the market and communicate that value effectively. For a limited time, qualified employers can access Insights+ at no cost through the end of 2024.
In today’s competitive talent market, employee benefits play a critical role in attracting and retaining top talent. Employers invest millions into their benefit programs every year, yet many struggle to prove the value of their offerings to employees and job candidates. This creates a costly communication gap where employers provide significant benefits that employees fail to recognize—often undervaluing them by over 50%. On average, that represents about $12,000 in annual value per employee that goes unacknowledged.
With Insights+, we solve this challenge by combining data-driven benchmarking with tools to highlight the value of your benefits in a clear and meaningful way. Employers can now see exactly how their offerings compare to competitors in their region, industry, and size—then showcase this independent validation to their employees and recruits.
Click here to see if you qualify for the free Insights+ early adopter opportunity!
FREE Insights+ Reports For Qualifying Employers -
How Insights+ Works
The process is simple. Employers submit their current employee benefits guide or, if one isn’t available, complete a short questionnaire. Using our proprietary database of more than 20,000 employers, Insights+ analyzes the full scope of your benefits, including medical, ancillary, leave, and retirement offerings. Within days, you’ll receive a detailed, 25+ page report that benchmarks your plan against similar employers.
But Insights+ doesn’t stop there. Employers also receive customized recognition tools—including badges and shareable materials—that can be used to communicate the value of benefits during recruitment and to current employees. These materials are designed to help employers bridge the perception gap by providing employees and job seekers with an objective and transparent view of the benefits being offered.
Click Here For A FREE 15 Minute Insights+ Expert Consultation
Why Insights+ Matters
Employers dedicate substantial resources to employee benefits, with the average annual medical benefits investment per employee reaching $23,200. Despite this significant expenditure, employees often fail to recognize the full value of what they receive, estimating the investment at just $11,200. This disconnect between actual and perceived value leaves employees undervaluing their benefits by more than half, which diminishes the impact of those benefits on both satisfaction and retention.
This perception gap isn’t just a communication failure—it’s a lost opportunity. Benefits are a key driver of employee satisfaction, yet when employees don’t understand their value, employers struggle to fully leverage their offerings. Insights+ solves this challenge by providing a transparent, independent analysis of benefit offerings that validates their true worth. Employers receive tools to effectively communicate the significance of their benefits package to both employees and recruits, ensuring that these investments drive the retention, satisfaction, and loyalty they are designed to achieve.
By bridging the gap between what employers provide and what employees perceive, Insights+ helps organizations unlock the full potential of their benefits program, ultimately improving workforce morale and amplifying their competitive advantage in the talent market.
Employee Benefits: A Missed Opportunity for Employers
Employee benefits consistently rank as one of the most important factors in hiring decisions. According to our research, 88% of job seekers evaluate benefits as part of their job search, yet only 22% of employers actively promote their benefits during recruitment. This creates a substantial gap between what candidates need to make informed decisions and what employers provide. For organizations that already offer strong benefits packages, this lack of communication is a missed opportunity to differentiate themselves in a competitive hiring environment.
The failure to clearly convey benefits not only impacts recruitment but also employee retention. When employees lack a proper understanding of their benefits, they are less likely to appreciate their employer’s investment in their well-being. For instance, many employees vastly underestimate how much their employer contributes to their healthcare, with responses ranging from less than 20% to over 80%. These varying perceptions reveal how poorly benefits information is understood across workforces, making it harder for employers to build trust and satisfaction.
Insights+ addresses these issues by offering tools that allow employers to present their benefits clearly, transparently, and effectively. With customized, shareable materials and independent verification of benefit value, employers can close the communication gap and ensure that employees and candidates alike fully understand what is being offered. This transparency enhances recruitment efforts, strengthens retention, and builds a more engaged workforce by helping employees see their employer as a true partner in their well-being.
The Bottom Line for Employers
Insights+ represents a major step forward for employers looking to maximize the impact of their benefits investments. For organizations already offering competitive benefits, Insights+ provides a way to highlight and promote their offerings to recruits and employees. For those whose benefits lag behind, the detailed benchmarking analysis identifies clear opportunities for improvement, helping employers align their benefits strategy with workforce expectations.
Even companies not looking to expand their benefits offerings can use Insights+ to identify cost-effective strategies for targeting candidates whose expectations align with their current plans. In every case, Insights+ delivers actionable insights that help employers achieve faster hiring, stronger retention, and better ROI on their benefits spending.
Mployer’s Take
We believe that transparency and data are critical to helping employers make smarter, more strategic decisions about their benefits. Insights+ delivers on this belief by giving employers the tools they need to evaluate, validate, and communicate the value of their benefits offerings.
For a limited time, we are offering Insights+ at no cost for qualified employers. Don’t miss this opportunity to see how your benefits stack up—and start using the tools that can transform your recruitment and retention efforts.
If you’re interested in seeing how your plan compares, click here to access your free Insights+ report for qualifying employers - otherwise, keep an eye out in future newsletter installments and on the Mployer blog for more information about the program coming soon!
Each month, Mployer collects and presents some of the most relevant and most pressing recent changes in law, compliance, and policy in areas related to employee benefits, health care, and human resources.
Beginning on January 13, 2025, the extension period for certain renewal Employee Authorization Document (EAD) applications filed on May 4, 2022 or later is now formalized at 540 days.
You can read more here.
As of January 1, 2025, the IRS mileage reimbursement rate for road miles driven for business purposes increased by 3 cents per mile from 67 to 70 cents per mile driven.
The IRS released a statement announcing a 25-cent increase in Patient-Centered Outcomes Research Institute fees for covered plan years ending on or after October 1, 2024, and before October 1, 2025.
The new fee is $3.47 per covered life.
You can read more here.
In response to a Federal Court of Appeals Decision that vacated the so-called 80/20/30 rule that was instituted in 2021, the Department of Labor officially reverted to the previous tip credit rule.
You can read more here.
In the final days before Christmas a few weeks ago, the Paperwork Burden Reduction Act and the Employer Reporting Improvement Act both became law.
The former will provide an alternative means for employers to distribute forms 1095-B and 1095-C to employees, and the latter extends the time employers have to respond to IRS notice of audit 226-J forms from 30 days to 90 days.
In 2025, the threshold for what qualifies as affordable coverage also increases from 8.39% to 9.02%, which means that an employee’s required contribution to the plan can be no more than 9.02% of their salary in order for the plan to be considered affordable and to avoid potentially paying the penalty.
You can read more about the affordability threshold here.
A federal court in Texas determined that the Department of Labor exceeded its authority last summer by increasing the minimum pay thresholds for employees to qualify under the executive, administrative, and professional and highly-compensated employee exceptions to minimum wage and overtime protections.
Those minimum pay thresholds have reverted to their prior levels - back to $684 per week for the EAP exemption (down from $844 per week under the now defunct rule), and back to $107,432 per year for the HCE exemption (down from $132,964 per year under the now defunct rule).
The National Labor Relations Board has issued a decision prohibiting employers from forcing employees under threat of punishment to attend meetings during which the employer will share views on unionization or its impacts.
Employers are allowed, however, to convene employees and share their views on unionization and potential impacts so long as employees are not disciplined or adversely affected in any way for not attending (or leaving early). Employers should not even keep or maintain such attendance records.
You can read more here.
Colorado: The City of Boulder increased the minimum wage to $15.57 ($12.55 for tipped employees) as of January 1, 2025.
Oregon: As of January 1, 2025, Paid Leave Oregon provides leave for employees completing necessary legal steps associated with adopting and/or fostering children.
New York: New York employers that receive criminal history records for applicants and employees must now provide those applicants and employees with a copy of those records and a copy of the applicable New York corrections law as well as an opportunity to correct any inaccurate information that may be contained in those records.
Further, as of January 1, 2025, New York employers are required to provide 20 hours of paid prenatal leave during a 52 week period. Also, as of the new year, the characteristics to which equal protection was extended via the New York State Human Rights Law and the resulting protections are formally enshrined in the New York State Constitution. Those characteristics include: age, disability, ethnicity, gender identity, gender expression, national origin, pregnancy, and anything else related to reproductive healthcare.
You can read more here.
You can find the complete IRS 2025 benefit contribution limit list here.
As of January 1, 2025, the minimum wage for work conducted in association with federal contracts covered by Executive Order 13658 is $13.30 ($9.30 for tipped employees), while the minimum wage paid for work conducted in association with federal contracts covered by Executive Order 14026 is $17.75 per hour for both tipped and non-tipped employees.
Additional guidance about which kinds of contracts are covered by which executive order can be found here.
You can find guidance for ERISA 403(b) plan eligibility requirements for long-term, part-time employees according to the updated standards from the Secure ACT 2.0 here.
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