Employment Law Updates 2025
Summer 2025 Edition
Employment law is always changing, and 2025 has been no exception. These changes have a ripple effect on small businesses. Sometimes, the changes are minimal and only require small tweaks. Other times, they are more impactful and require budgetary adjustments or process changes.
Below are some federal-level updates that small business owners should note, along with details on how these updates might impact your existing HR policies and processes. Remember to check for any employment law updates in the states where your employees work, as states may require additional changes.
I9 Verifications/Immigration and Customs Enforcement (ICE)
I9 verifications are a long-standing federal requirement to confirm that the people you hire:;
are who they say they are (identity)
are legally eligible to work in the United States (eligibility)
I9 verification is required to happen within the first 72 hours of an employee’s tenure. When hiring government contractors and when operating in some states, you also need to use EVerify.
What’s the impact?
While not specifically an employment law change, the increase in ICE I9 audits, raids, and deportations has highlighted this requirement. It’s now critical to understand what is and, just as importantly, what is NOT required of an employer for the safety of their employees and their business.
To address this, make sure you have completed and archived all I9 verifications and, if necessary, Everify checks compliantly, and know where to find them.
It’s also a good idea to create a Written Response Plan. If ICE raids your workplace, know your rights and the rights of your employees. For instance, ICE agents are NOT allowed to go into “non-public areas” without a judicial warrant, so be sure those areas are clearly marked. Employees have the right to remain silent and to ask if they are under arrest. If agents provide a warrant that requests certain documents, ask to see it, and then provide only the requested material.
Read all about creating a written response plan and other advice on how to prepare and navigate I9 audits and ICE raids here.
Qualified Overtime and Tip Taxing
The One Big Beautiful Bill Act (OBBBA) introduced significant changes impacting overtime pay and tipped earnings, particularly concerning federal income tax.
The "No tax on overtime" deduction allows eligible workers to deduct the premium portion of overtime pay from their federal taxable income, up to a certain limit.
The "No tax on tips" deduction permits tipped workers, in qualifying occupations, to deduct qualified tips from their federal taxable income for tax years 2025–2028, also subject to limits and phase-outs for high earners.
What’s the impact?
Employers will now need to track and report qualified overtime or tips separately on Form W-2 and inform employees that they will need to include information about this benefit on their taxes.
You will probably have to update your payroll systems to track qualified income and consult with your accountant and tax preparers to be sure you’re meeting tracking requirements.
Read all about it here.
Executive Orders 14151 and 14168
These two executive orders, among others, initiated by the Trump administration rolled back diversity, equity, and inclusion (DEI) initiatives across the federal government and private sector.
Executive Order 14151 intends to end federal DEI programs and personnel.
Executive Order 14168 seeks to limit or remove protections based on gender identity in federal policy and define sex based on assignment at birth.
What is the impact?
One interesting thing to note is that there is very little guidance yet on how these new Executive Orders will be enforced. Also, the federal agencies who typically create guidelines and enforce these orders (EEOC and NLRD) have been without a quorum for their Boards since the beginning of the current administration. They cannot rule or vote, which means there is currently no clear indication of how these orders will impact small businesses.
The good news is that employment practices and programs that do not enhance, promote, or hire one group over another are still very much covered under the requirements from the Title VII (Civil Rights Act of 1964). For example, if you're hiring based on skills, knowledge, and abilities — regardless of how someone identifies — you’re in good shape!
Read all about Executive Order 14151 and Executive Order 14168.
Discrimination (for Majority Identity)
In the Ames vs Ohio ruling, the Supreme Court found that Title VII of the Civil Rights Act does not impose a higher burden of proof on individuals from majority groups alleging employment discrimination. In this case, the Supreme Court unanimously reversed the Sixth Circuit's decision, which had required a "background circumstances" test for majority-group plaintiffs like Marlean Ames, a heterosexual identifying woman, who claimed discrimination based on sexual orientation.
What’s the impact?
This ruling means that the same standards need to be applied regardless of whether the plaintiff identifies as a majority or a minority group under Title VII. For employers, this could lead to a higher rate of cases or claims of what is often called “reverse discrimination” and further increases scrutiny of DEI initiatives.
Read more about it here.
Independent Contractor and Fair Labor Standards Act (FLSA) Exemptions (Take 2)
Remember last year when the Department of Labor (DOL) updated how they would assess independent contractors and changed the wage thresholds for overtime exemption? Yeah … those are no longer in effect.
What’s the impact?
Although these two employee-friendly initiatives have been rolled back, it’s still an important reminder to use the DOL guidelines when assessing how to classify workers and clarifying requirements for when an employee is eligible for overtime or salaried pay.
Wage and labor fines and penalties are costly, so being sure you’re compliant is vital to saving you time, money, and stress down the road.
Learn about the current FLSA exemption guidelines here and independent contractor classification assessment here.
Have questions about any of these updates and how they might impact your small business? Set up a FREE 30-minute consultation here.
This content is for informational purposes only and does not constitute legal advice. Please consult a qualified attorney to understand how these employment law updates may apply to your specific business or situation.
