Littler’s Workplace Policy Institute Presents: Labor Day Report – 2025

Introduction 

The first eight months of the Trump administration saw dramatic changes in labor and employment policy—from civil rights to traditional labor law to immigration—with more to come as key positions at oversight and enforcement agencies are filled and the executive branch’s agenda is reset in line with White House priorities. While in some instances these changes may be to the benefit of employers, that is not universal—this administration’s relationship with organized labor is, at best, a non-traditional one. 

Moreover, as we have seen in the past, when the federal government attempts to pare back workplace protections or tip the scale of employment and labor law in favor of management, so-called “blue states” often step in to try to fill via state law what they perceive to be federal gaps. At the same time, many “red state” governors and legislatures are taking their cue from the White House, advancing legislation that aligns with the current administration’s agenda.

Littler’s Workplace Policy Institute’s eighth annual Labor Day Report examines the trends we have seen thus far and offers some predictions as to what the shape of labor and employment law may be in the future. 

Federal “Independent” Agencies Face Uncertain Future

Among the Trump administration’s first priorities was reining in so-called independent agencies. It took fast and decisive action on that front, firing a swath of the agencies’ leaders. Among those leaders were appointees at labor and employment agencies, including the National Labor Relations Board (NLRB) and Equal Employment Opportunity Commission (EEOC). Those firings are still tied up in litigation. But in the meantime, the appointees have remained out of a job, leaving their agencies without a “quorum” and unable to perform many of their normal tasks.  

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Independent agencies date back to the Progressive Era and the New Deal. They were set up to address challenges posed by new technologies and a growing economy. The idea was to create expert administrators who could manage complex problems with specialized expertise. But policymakers worried that they wouldn’t be able to use their expertise properly if they were influenced by typical Washington politics. So, they were given certain features to blunt political influence. For example, many were designed as multi-member commissions with staggered appointments, which ensured that no single president could control their membership. The appointees were also given legal protection from removal, which prevented a president from firing them without some kind of cause.

These removal protections, however, have become increasingly controversial. Courts and scholars have wondered whether they can be squared with Article II of the U.S. Constitution, which assigns all executive power to the president. Some think that this assignment of executive power gives the president unilateral authority over the executive branch—a view sometimes called the “unitary executive theory.”

President Trump decided to test that theory early and often. After taking office, he quickly removed the heads of multiple independent agencies, including NLRB Member Gwynn Wilcox and EEOC Commissioners Charlotte Burrows and Jocelyn Samuels. Those firings prompted lawsuits, and Wilcox won some early victories in lower courts. But in late May, the U.S. Supreme Court stepped in. In a short opinion, the Court said that the administration was likely to win Wilcox’s case on the merits because the president has unrestricted removal power whenever an agency exercises “executive power.” And in the Court’s view, that kind of power has been given to the NLRB. 

The Court stopped short of deciding the case for good; it ruled only on whether lower courts should have ordered the administration to put Wilcox back in her job. But the Court sent a strong signal about how it views the ultimate merits. And as a practical matter, its decision means that Wilcox isn’t coming back to the NLRB anytime soon. 

For employers, this back and forth leaves lingering uncertainty. Both the EEOC and NLRB now have too few appointees to perform all their normal activities. The NLRB, for example, can’t decide unfair labor practice charges until it has at least three members. And while nominations have been made for both agencies, it’s not clear whether or how quickly these nominees will be confirmed. And in the meantime, it’s unclear how much lower-level agency officials can do on their own. Some litigants have already argued that NLRB regional officials can’t certify election results until the agency regains a quorum. 

Going forward, employers should keep their eye on the nominees, who must be confirmed by the Senate to take their seats. And neither agency will be settled until it has a minimum slate of confirmed appointees. Employers should also keep their eye on the Supreme Court. Ultimately, the Court will have to decide whether these removals were lawful. And if they were, “independent” agencies may be a thing of the past. Instead of exercising independent “expertise,” they may simply track the policy priorities of the incumbent president. 

Labor Law Without a Labor Board? With the NLRB Sidelined, States Step In

For more than a generation, labor relations has been a federal issue. Labor law has been synonymous with the National Labor Relations Act, and labor policy has been steered by the National Labor Relations Board. But with the Board lacking a quorum, that paradigm may be shifting. Multiple states are considering laws to transfer authority from the NLRB to their own local agencies. And in the process, they may de-federalize American labor relations.

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Labor relations has been governed by federal law since the 1930s. At the time, labor markets were tumultuous, often marred by lengthy and sometimes violent strikes. Congress sought to calm the turmoil by funneling disputes into peaceful negotiations. In the 1935 Wagner Act, now known as the NLRA, Congress created a uniform system for promoting collective bargaining. To enforce that system, it created the NLRB, which has the responsibility to set labor policy for the whole country.

The NLRA doesn’t actually say that this system is exclusive—the statute has no “preemption” clause. But courts have read it that way for decades. They’ve reasoned that to ensure a uniform national approach, the NLRB must have first crack at resolving labor disputes. To protect the NLRB’s authority, they’ve cast a wide preemptive bubble. They’ve said that when activity is “arguably” protected or “arguably” prohibited by the NLRA, it’s the responsibility of the NLRB to address the matter first. States have no power to interfere with the NLRB’s process by setting up their own alternative schemes. 

Recently, however, the NLRB hasn’t been able to do much of anything. In January 2025, President Trump fired NLRB Member Gwynn Wilcox. Wilcox’s removal left the NLRB with only two active members. By law, the agency needs at least three members to do anything—including resolve unfair labor practice charges. So without a three-member quorum, it has been stalled. 

Concerned by what they see as a gap in labor enforcement, some states have stepped in. Legislators in California, New York, and Massachusetts have proposed bills that would transfer responsibility from the NLRB to state agencies. The bills differ in how they would do that. While Massachusetts’ bill would transfer authority only in limited circumstances, California’s bill would transfer responsibility whenever the NLRB moves too slowly. In effect, California’s bill would allow a state agency to step in even when the NLRB does have a quorum. But these differences aside, all of the bills would erode the NLRB’s longstanding exclusivity. All of them would challenge the primacy of federal labor law. 

For now, it’s not clear how far the bills will go. The president has nominated two new members to the NLRB. If those nominees are confirmed, they will restore the NLRB’s quorum. And with the NLRB back in operation, the state bills may lose steam. But if they don’t, they could inject uncertainty into labor markets. Employers, unions, and workers will be less certain about which law—state or federal—applies to their workplaces. That uncertainty will doubtless produce lawsuits. And those lawsuits will inevitably force courts to decide whether the longstanding view still holds: Is labor relations a federal issue? Or can we have labor law without a single labor board? 

Rock Bottom, or Still Falling? Unions Continue to Lose Members

Despite more organizing efforts and elections, unions continue to see their membership rolls wither. The latest data show union membership has fallen, despite changes in labor policy during the Biden administration designed to increase union market share, and overall union density for FY 2024 hit the lowest levels on record. The decline seems unlikely to reverse, as long-term trends are battering unions’ traditional strongholds in the public sector and union-friendly states. 

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This story of decline emerges from the raw numbers. In its most recent survey, the U.S. Bureau of Labor Statistics reported that overall union density fell to 9.9 percent of nonagricultural workers, less than a third of its mid-20th-century peak. These numbers were even more dour in the private sector, where union density fell to 5.9%. That marks the lowest private-sector union density ever recorded. The decline wasn’t just a matter of failing to keep up with a growing job market. Total membership was down too, falling by 167,000 workers.

These trends are hardly new. In the 1950s, unions represented more than one in three workers. But since then, they have declined steadily. Most years have seen at least a moderate decline, with union density increasing year over year only five times. By 1980, these steady losses had driven union density down to just over 22%. And density continued to plunge from there, especially in the private sector. The result is that today, unions represent a smaller slice of private-sector workers than they did in 1935, when the National Labor Relations Act was passed. 

The trend may be exacerbated by declines in labor’s traditional strongholds. The driver is both geographic and sectoral. Geographically, unions now cluster in a handful of states. Almost half of all union members live in six states: California, New York, Illinois, New Jersey, Pennsylvania, and Ohio. And in recent years, those states have been among the biggest losers of population, as people have increasingly moved to lower-tax jurisdictions. By contrast, the biggest gainers of population have been state like South Carolina, North Carolina, Tennessee, and Idaho—all states with below-average union densities.

From a sectoral standpoint, unions have lost ground even in what was once their best source for new members—state and local government. Since the 1960s, public-sector employees have made up an increasingly large share of union members. Though the public sector accounts for only about 15% of the national workforce, public employees now make up almost half of union membership. That difference owes mostly to state labor laws, which allowed unions to organize millions of new members in the 1960s and 70s. But now, that trend is starting to turn. States like Utah and Florida have passed laws limiting organizing and collective bargaining by state employees. And those changes are showing up in the numbers. While union membership among federal employees held steady last year, it fell by almost a full percentage point at the state and local level.  

Another trend that has continued is an overall decline in strikes. When unions were at their peak in the 1950s, the economy experienced hundreds of large strikes each year. But today, big strikes are much rarer. The Bureau of Labor Statistics recorded only 31 in 2024, down from 33 the year before. And while that figure is up from an average of 17 over the prior decade, it’s still only a fraction of the levels seen at mid-century.

More States Banning Mandatory Employer-Sponsored Meetings

A strong trend that continues into 2025 is the growing list of states that have enacted laws to prohibit or restrict mandatory employer-sponsored meetings, often referred to as “captive audience meetings.” The list currently includes the following 13 states: Alaska, California, Connecticut, Hawaii, Illinois, Maine, Minnesota, New Jersey, New York, Oregon, Vermont, Washington, and most recently, Rhode Island.  

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Most of these state laws go well beyond prohibiting “captive audience meetings.” In addition to prohibiting employers from discharging, discipling, penalizing, threatening, or otherwise taking adverse employment action against any employee for refusing to attend a mandatory employer-sponsored meeting to learn about the employer’s views on unionization, they also give aggrieved employees a private right of action to file suit against their current or former employer. Available remedies to a prevailing plaintiff may include injunctive relief, back pay, reinstatement to the employee’s former position or equivalent position, reestablishment of any employee benefits (including seniority) to which the employee would otherwise have been entitled had the violation not occurred, and other appropriate relief as deemed necessary by the court to make the employee whole, including monetary damages and reasonable attorney’s fees and costs. 

These laws not only restrict employers’ ability to share their views and express themselves freely in the workplace, but also place them at a significant disadvantage when facing a rapidly developing unionization campaign. As such, several business and trade groups have filed a string of legal challenges against these state laws in Connecticut, Minnesota, Illinois, and California, while others are being contemplated. The groups argue the laws violate employers’ First Amendment rights by having a chilling effect on free speech and are preempted by federal labor law. The NLRA preempts state laws that conflict with its provisions or attempt to regulate areas already covered by the NLRA. Specifically, the NLRA preempts state laws that regulate union organizing, collective bargaining, and unfair labor practices, as the NLRA governs these areas of labor relations exclusively. Accordingly, state-level action to ban captive audience meetings is likely preempted by the NLRA. As of this writing, no decisions have been handed down in these cases. 

At the federal level, during the previous administration in November 2024, the National Labor Relations Board overturned a 76-year-old precedent that recognized the free speech rights of employers to hold mandatory meetings with groups of employees to express their views on unionization during a union organizing campaign. This decision is being challenged and is currently pending before the Eleventh Circuit. 

Meanwhile, there are early signs that the new administration could change direction on this issue. On February 14, 2025, NLRB Acting General Counsel William Cowen issued a Memorandum to all field offices, rescinding dozens of policy memos issued by the Board’s former General Counsel Jennifer Abruzzo, including the controversial GC Memorandum 22-04, The Right to Refrain from Captive Audience and other Mandatory Meetings. Although Cowen’s Memorandum is non-binding and does not itself overturn the Board’s decision, it is both instructive and indicative of a potential policy shift on this issue. Once the NLRB regains a quorum with a Republican majority, the Board may choose to revisit the 2024 decision in an appropriate case and overrule it. 

The “Faster Labor Contract Act” Seeks to Compel Quicker Labor Agreements, Raising Big Legal Questions

Unveiled in the spring of 2025, the Faster Labor Contracts Act proposed to speed up labor-management negotiations by funneling bargaining into mandatory mediation and – for the first time in the private sector – binding arbitration. Though that idea wasn’t new, the bill garnered attention because of the names behind it, including Republican Senator Josh Hawley. Nevertheless, the bill is mostly supported by Democrats and is strongly opposed by the business community, not only because it speeds up the process of collective bargaining, but because the bill would for the first time allow outsiders to compel employers to agree to specific bargaining agreements.

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Unsurprisingly, the bill gained immediate support from major labor unions. The International Brotherhood of Teamsters lauded it as “real labor law reform.” On the other side, management organizations largely panned the idea. They said it would deprive employers of the right to freely negotiate and deny workers of the right to vote on a contract. So despite the bill’s bipartisan sponsors, it divided the labor-management community along familiar lines.

From a legal standpoint, the bill still raises a number of difficult questions. For one, it’s unclear whether the bill’s attempt to compel employers to accept government-imposed terms of employment would survive constitutional challenge. Nor would the “faster” schedule for imposing such agreements fit with the current approach to challenging a union’s certification as the employee’s bargaining representative. Today, if an employer thinks a union shouldn’t have been certified, the employer can commit a “technical” violation by refusing to bargain. That refusal draws an unfair labor practice charge. Once federal officials rule on the charge, the employer can take the whole case to a U.S. court of appeals. But under the Faster Labor Contracts Act, that avenue seems to be closed. 

Legal questions aside, things may get more complicated in the coming months. With tax reform out of the way, Congress may move onto other priorities, including labor law reform. And the Faster Labor Contracts Act won’t be the only reform on Congress’s plate. Senator Hawley has advanced other proposals, including a bill to hike the federal minimum wage. So it’s possible that Congress may have its fullest labor agenda in a generation—hardly what most expected from a federal government controlled largely by Republicans. 

Construction Industry Challenges Continue Against Federal PLA Mandates and Davis-Bacon Revision

On February 4, 2022, President Biden signed Executive Order 14063, which for the first time mandated the use of Project Labor Agreements (PLAs) on federal construction projects valued at $35 million or more. The order was implemented by a rule of the Federal Acquisition Regulatory Council effective January 22, 2024. To the surprise of many, President Trump has so far allowed the Biden order to remain in effect, though two federal courts have supported arguments that the PLA mandate violates the federal Competition in Contracting Act (CICA) by imposing unjustified discriminatory requirements on non-union bidders for federal contracts.

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At this writing, a suit is pending in the U.S. Court of Appeals for the Eleventh Circuit, seeking a preliminary injunction prohibiting enforcement of the PLA mandate. At the same time, the Court of Federal Claims has ruled in favor of multiple bid protests against the PLA mandate, with more protests currently under consideration.

Meanwhile, a wholesale revision by the Department of Labor aimed at prevailing wage requirements under the Davis-Bacon Act, applicable to all construction contractors on even the smallest government projects, went into effect on October 23, 2023. Multiple court challenges were filed against the revised rules, which undid Reagan-era reforms and expanded the scope of prevailing wage determinations and their enforcement. As a result of the court challenges, several parts of the revised rules were enjoined by a federal judge; an additional suit seeking a broader injunction against even more of the revised rules remains pending. 

In 2025, the Trump DOL announced that the agency is considering a new rulemaking that could result in rescission or at least changes to the challenged Davis-Bacon rule. The litigation over Biden rule has been paused to allow time for the DOL to complete its review and potentially issue a new notice of proposed rulemaking.

Trump Administration’s Focus on DEI Continues

Since the start of his second term in January, the president has made the elimination of diversity, equity and inclusion programs—in the federal government, in government contracting, and in the private sector—a signature issue and singular focus. On his second day in office, he revoked Executive Order 11246—the 1965 order issued by President Lyndon B. Johnson that created historic affirmative action requirements for companies doing business with the federal government. In the weeks and months that followed, the president has directed the Department of Justice, the Department of Labor’s Office of Federal Contract Compliance Programs, and federal agencies throughout the government to focus their efforts on eliminating DEI programs as aggressively as possible.

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In addition to targeting business, higher education institutions have drawn special attention, as the federal government has attempted to leverage its control over federal grants, loan programs, and student visas to address what the president has called “radical” progressive ideologies. This has led to clashes with a number of high-profile universities, including Harvard, Columbia, Brown, Duke, and others.

Since January, Littler has published more than two dozen articles charting the administration’s course in seeking to eradicate what the president has variously called “illegal,” “immoral,” “wasteful” and discriminatory DEI programs. Many of these efforts have been challenged in court, with varying degrees of success, and numerous legal efforts still pending. A chronological compilation of these publications to date may be found here. 

The agency responsible for enforcing civil rights laws, the Equal Employment Opportunity Commission, has been limited in its effort to advance the administration’s position by the lack of a working quorum. As previously discussed, shortly after his inauguration, the president fired two of the agency’s three Democratic members, leaving only two members on the five-member Commission: Republican Andrea Lucas, who was designated as acting chair of the agency on Inauguration Day and was reconfirmed in July for a term of five years, and Democrat Kolpana Kotagal, whose term is scheduled to expire in 2027. With only two members, the Commission lacks a quorum and thus cannot advance significant new policy matters, revisit or repeal prior policies approved by a vote of the Commission, or commence certain new lawsuits.

The absence of a quorum has not limited the acting chair in addressing these issues within the scope of her authority. Upon her designation as acting chair, Lucas indicated in a statement that her “priorities will include rooting out unlawful DEI-motivated race and sex discrimination; protecting American workers from anti-American national origin discrimination; defending the biological and binary reality of sex and related rights, including women’s rights to single‑sex spaces at work; protecting workers from religious bias and harassment, including antisemitism; and remedying other areas of recent under-enforcement.” 

In March, she issued a technical assistance document (which, unlike more formal guidance documents, does not require approval by the full Commission) entitled, “What to Do if You Experience Discrimination Related to DEI at Work,” which stresses that Title VII does not provide any exception for DEI or “diversity interests” in prohibiting discrimination based on race, sex, or other protected category, and a general business interest in diversity or equity is insufficient to support any employment decision being made in whole or in part on the basis of a protected characteristic. It also sets forth the procedures for an employee who claims to have experienced DEI-related discrimination to file a charge and seek an investigation and includes examples of what the agency views as potential actionable discrimination if it takes into account an employee’s or applicant’s race, sex, or other protected category.

In May, the president nominated Brittany Panuccio, a Republican, to serve as a commissioner for a term expiring in 2029. Panuccio is currently an assistant U.S. attorney in Florida and served at the Department of Education during the first Trump administration. Her nomination has been approved by the Senate Committee on Health, Education, Labor, and Pensions, and is expected to come to the floor of the Senate for approval this fall. If confirmed, Panuccio would restore a quorum at the Commission, at which point we expect it will likely revisit prior guidance and DEI-related topics including voluntary affirmative action programs, the scope of Title VII’s protections, and what the agency considers to be so-called “illegal DEI.”

In less than a year, the new administration has dramatically rewritten more than six decades of federal civil rights policy. How these efforts fare in the courts, how aggressively the administration continues to press the issue, and what various federal government agencies do to advance this agenda—and what states do in response—all remain to be seen. Given the high-profile DEI issues that have drawn to date, employers in all sectors that maintain DEI initiatives are advised to consult with counsel and stay current on developments.

White Collar Overtime: Will We See a 2026 Increase?

In 2019, during the first Trump administration, the U.S. Department of Labor promulgated a regulation increasing the minimum salary threshold for the so-called “white collar exemptions” under the Fair Labor Standards Act. In 2024, the Biden administration tried to increase the threshold, but its effort was struck down by a federal court. The DOL appealed that decision, and the appeal is now pending in the Fifth Circuit. The question now is whether the second Trump administration will abandon the appeal and allow the 2019 rule to remain in effect, or will it revisit and attempt to increase that 2019 threshold?

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The FLSA generally requires an employer to pay an employee overtime compensation at a rate of one and one-half times the employee’s regular rate for hours worked in excess of 40 in a workweek. But the law exempts some employees from that requirement, notably, certain executive, administrative, and professional (EAP) workers under the white-collar exemption. To qualify for the white-collar exemption, an employee must generally satisfy a three-prong test: the employee must be paid on a salary basis, i.e., be paid a fixed and predetermined sum per week irrespective of the quantity or quality of the work performed (the “salary basis” test); the employee’s primary work must be the performance of exempt EAP duties (the “duties” test); and the employee must earn a minimum salary (the “salary threshold” test). In 2019, during the first Trump administration, the DOL issued final regulations raising the minimum salary threshold to $684 per week, or $35,568 annually; any employee subject to the salary threshold test who made less than $684 per week would be classified as non-exempt. 

In April 2024, the DOL attempted to raise the white-collar exemption salary threshold. The final rule would have raised the minimum salary in two steps. First, using the same methodology the DOL used in 2019, the rule raised the salary threshold to $844 per week ($43,888 annually). This increase became generally effective on July 1, 2024. The rule was scheduled to raise the salary threshold to $1,128 per week ($58,656 annually) on January 1, 2025. Thereafter, the rule would have automatically updated the salary threshold every three years. The State of Texas along with a coalition of trade associations and businesses sued to challenge the rule.¹

In a November 2024 decision, the court held with respect to both the July 1, 2024 and January 1, 2025 increases, that by setting the salary threshold as high as it did, the DOL created a de facto “salary only” test for the EAP exemption. This, the court held, was in excess of the Department’s authority under the statute insofar as the explicit text of the FLSA speaks in terms of the duties an employee performs, not the salary they earn. The court likewise found that given the text of the FLSA expressly requires that increases to the salary threshold be made via regulations in accordance with the Administrative Procedure Act, the DOL lacked the authority to put future increases on autopilot. Finally, the court found that given the nationwide effect of the rule on hundreds of thousands of employers and millions of employees, striking down the rule on a nationwide basis was warranted. The court enjoined both increases from taking effect.

The government appealed the lower court’s decision, and the appeal is currently pending in the Fifth Circuit. Following the change in administration, however, the Department asked that the appeal be held in abeyance while it determines what it may do with respect to the minimum salary threshold. While under normal circumstances we might not expect a Republican administration to revisit a rule it established only six years ago, with midterm elections around the corner, we would not rule out the possibility of an increased salary threshold that could make more employees eligible for overtime. Employers should also remain mindful that some states have salary thresholds that exceed the FLSA threshold, including Alaska, California, Colorado, Maine, New York, and Washington.

Minimum Wages March Higher, Potentially Approaching a Tipping Point

Across the country, minimum wages in 2025 marched steadily upward. While some states increased their minimum wages deliberately, others raised them through automatic updates tied to inflation. Still others hiked minimum wages for targeted sectors, often singling out professions tied to fixed locations—and therefore unable to relocate to less-costly climes. Meanwhile, at the federal level, lawmakers on both sides of the aisle proposed to boost minimum wages nationwide. All these developments have raised not only wages, but also questions: How high is too high for the minimum wage? 

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In all, 21 states and 48 localities raised their minimum wages this year. That number includes 55 jurisdictions with minimums now topping $15 an hour. It also includes two states and 38 localities with minimums of $17 or more. The highest generally applicable minimum wages clustered in Washington State, where four separate localities now require employers to pay more than $20 an hour.

Even bigger increases hit targeted industries. In California, wages for certain large healthcare employers reached $24 an hour. In New York City, pay for independent delivery workers hit $21.44 an hour, including a 7.41% inflation bump. New York City also raised minimum pay for rideshare drivers by 5% (down from an initial proposal of 6.5%). And in Los Angeles, lawmakers approved a wage hike for certain hotel and tourism workers. They scheduled minimums to hit to $30 by 2028, when the city is set to host the Olympics. (A local hotel union, Unite Here Local 11, campaigned for the increase as an “Olympic wage.”) That particular increase was put on pause while local employers push to repeal it by referendum. But even so, the trend was clear: In certain industries, especially those with jobs tied to a specific location, minimum wages spiked even faster. 

Higher wages at the local level also fueled new proposals to increase at the federal level. Proposals emerged from both sides of the aisle. On the Republican side, Sen. Josh Hawley (R-MO) introduced a bill to raise the federal minimum to $15 an hour by 2030. (Notably, Senator Hawley’s home state raised its own minimum wage to $15 an hour this year.) Sen. Bernie Sanders (I-VT), who caucuses with the Democrats, proposed to raise wages to $17 an hour. That proposal would also phase out alternative minimum wages for younger workers, workers with disabilities, and workers who receive tips. 

These initiatives show little sign of slowing down. Minimum-wage laws are increasingly written to boost wages automatically to keep up with inflation. And with inflation surging in the post-pandemic era, minimum wages have hit unprecedented levels. The trend is unlikely to slow and is probably impossible to reverse. 

Less clear are the long-term economic effects. Economists disagree about whether minimum wages reduce overall employment. Some economists think that modest increases have little to no effect on how many workers get hired. They generally agree, however, that at some point price theory takes over, and higher minimum wages do reduce jobs. And in some industries, the minimum wage may be approaching that point. For example according to New York City data, in the first year of the city’s minimum-pay law for delivery workers, nearly 23% of the workers lost their jobs. And in Los Angeles, hotels are warning that they may have to cut workers and services to adapt to the so-called Olympic wage. 

What’s certain is that employers in these industries are facing headwinds. And in the short term, those headwinds are only likely to get stronger.

New Rules for Taxation of Tips and Overtime

On July 4, 2025, President Trump signed into law sweeping tax and budget legislation that included two prominent items of immediate concern to many employers and employees: the creation of an “above the line” deduction for certain qualified tips and qualified overtime pay for the next four tax years.

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While on the surface these new deductions appear to be relatively straightforward, they are in fact subject to several rules and limitations. Littler’s detailed analysis of when, whether, and how employees may avail themselves of these deductions, and how employers must administer them may be found here.

Key take-aways for both employees and employers include:

• The deduction for tips is capped at $25,000 per year. This amount is reduced by $100 for each $1,000 by which the taxpayer’s modified adjusted gross income exceeds $150,000 ($300,000 in the case of a joint return). The deduction for overtime, in contrast, is capped at $12,500 ($25,000 in the case of a joint return) in any taxable year. This amount is reduced by $100 for each $1,000 by which the taxpayer’s modified adjusted gross income exceeds $150,000 ($300,000 in the case of a joint return).
• The law imposes certain reporting requirements with respect to each deduction. For tips, employers must include on Form W-2 the total amount of cash tips reported by the employee, as well as the employee’s qualifying occupation. For 2025, the Act authorizes the reporting party to “approximate” the amount designated as cash tips pursuant to a “reasonable method” to be specified by the Treasury secretary. With respect to overtime, employers must include the total amount of qualified overtime compensation as a separate line item on Form W-2. This will require employers to keep a distinct record of the overtime premium compensation that is both (a) required under the FLSA and (b) in excess of the regular rate. For 2025, the Act authorizes the reporting party to “approximate” the amount designated as qualified overtime compensation pursuant to a “reasonable method” to be specified by the Treasury secretary.
• With respect to both tips and overtime, the deduction is only allowable where the taxpayer includes their social security number on their return (and, if married and filing jointly, their spouse’s social security number as well).
• The law provides additional definitions and limitations as to when tips and overtime will be considered “qualified” for purposes of claiming the deduction.
• Tips that are received by an individual engaged in their own trade or business (i.e., not an employee) are subject to special rules and limitations.

The “no tax on tips” and “no tax on overtime” provisions are likely to be popular with many employees across the country, especially hospitality and service industry workers who depend heavily on tips for much of their income and employees who routinely work significant amounts of overtime. However, these new deductions bring their own set of challenges for employers.

Employers navigating the new Form W-2 reporting requirements or who may be considering restructuring employee compensation in consideration of the “no tax on tips” and “no tax on overtime” provisions of the Act are encouraged to consult with experienced employment counsel to make certain that they consider all relevant factors in their decision-making.

Worker Classification Continues to be Front and Center for Federal and State Policymakers

Worker classification—whether a given worker is an employee or an independent contractor—continues to be a hotly-debated matter in 2025, with the federal government appearing ready to loosen classification rules to allow more workers to be classified as contractors, and so-called “blue” states responding with efforts to adopt standards more likely to result in traditional employee status. 

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Proper classification of a worker is paramount because it triggers coverage under federal wage-and-hour law. The Fair Labor Standards Act (FLSA) sets federal rules for minimum wages and overtime and requires covered employers to maintain certain records. But those standards and requirements apply only to employees and not independent contractors, making correct classification under the FLSA (and cognate state laws) critical.

Federal Regulation of Independent Contractor Status. On the regulatory front, the change in administration and new leadership at the Department of Labor is likely to have a direct impact on worker classification.

In the final days of the first Trump administration, the DOL issued an independent contractor rule that significantly clarified the standards for determining contractor status and generally expanded the instances in which a worker could be deemed an independent contractor. Shortly after taking office, then-President Biden attempted to delay and later repeal that rule, but—in a lawsuit filed on behalf of a coalition of trade associations²—a federal court found that the attempt violated the Administrative Procedure Act. The Biden administration then sought to craft its own rule, which it finalized in January of 2024. The Biden-era rule reversed much of what that first Trump administration rule had changed and generally made it harder to classify workers as independent contractors. 

Several legal challenges to the Biden-era rule were filed and remain pending in U.S. district courts and federal courts of appeals. At the Department’s request, all of these cases are currently being held in abeyance pending the DOL’s self-proclaimed intent “to reconsider the regulation at issue in this litigation and explor[e] available options, including whether to issue a notice of proposed rulemaking rescinding the [Biden-era] Rule.”

On May 1, 2025, the DOL announced via a Field Assistance Bulletin that it will no longer enforce the Biden-era rule. Rather, the DOL indicated that it will enforce the FLSA in accordance with Fact Sheet #13 (from July 2008, not March 2024) and as further informed by the reinstated Opinion Letter FLSA 2019-6, which addresses classification in the context of virtual marketplace platforms. Taken as a whole, while these announcements do not formally rescind the Biden-era rule, they make it virtually certain that the DOL will dramatically change or replace the Biden-era rule when its review is completed, thus making it easier for companies to classify workers as independent contractors under federal law.

Legislative Proposals. In Congress, the issue of independent contractor status continues to be among the most debated in the labor and employment space. Numerous proposals to adopt a unified standard for employee classification under federal labor laws have been introduced, with at least one bill approved in committee, which will very possibly come to the floor of the full U.S. House of Representatives for a vote this fall. 

H.R. 1319, the “Modern Worker Empowerment Act,” would expand the definition of “independent contractor” under the NLRA and FLSA to include those workers with “the opportunities and risks inherent with entrepreneurship,” including managerial discretion or “professional judgment.” We have also seen a number of efforts to expand the concept of portable benefits, that is, proposals that would allow companies to offer workers benefits such as health insurance without being deemed to be the worker’s employer, and the worker being allowed to carry those benefit accounts to other workplaces and engagements. While these will continue to be debated, given the polarized political climate in Washington and historically narrow margins in the House and Senate, we think it is unlikely they will be enacted into law anytime soon.

State Regulation. Federal regulation of worker status is only part of the equation. Many states have adopted their own statutory or regulatory tests for worker classification, and some apply different tests in different contexts (e.g., wage and hour, workers’ compensation, unemployment insurance). While some states largely track the federal standard under the FLSA, others apply different multi-factor tests, while still other states have adopted varying versions of the so-called “ABC Test” – a three-prong test that can make it extremely difficult to confidently classify a worker as an independent contractor. Just this spring, New Jersey promulgated draft rules that, if finalized, would adopt the most restrictive version of the ABC Test in the nation, making it virtually impossible to safely classify a worker as an independent contractor in the Garden State. 

Whether other states follow suit in the weeks and months to come—particularly if the federal Department of Labor rolls out a more lenient classification standard—remains to be seen. But employers grappling with classification issues, especially in states with stringent tests for independent contractor status, are advised to consult counsel.

What’s Happening on the Workplace Safety and Heath Front?

Even with deregulatory efforts underway from the Trump administration, the Department of Labor’s Occupational Safety and Health Administration (OSHA) has moved forward with several regulatory actions and updated guidance.

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One of the major rulemakings OSHA is working on this year focuses on OSHA’s Heat Injury and Illness Prevention in Outdoor and Indoor Work Settings rulemaking. On July 2, 2025, OSHA wrapped up 2.5 weeks of informal public hearings on the proposed rule in which the agency heard testimony from a variety of interested stakeholders. As proposed, this rule would significantly impact an estimated 34 million people and would apply to general industry, agriculture, construction, manufacturing, and maritime industries. 

During the informal public hearing, OSHA representatives directed several questions to individuals who had filed their notice of intention to appear to speak during the hearing. Agency questions sought additional feedback on what a performance-based standard might look like, how OSHA would be able to enforce such a standard, and whether any stakeholders currently were using heat plans that helped prevent heat injury and illness. The agency also requested copies of those plans so that OSHA could review them. The post-hearing comment period is open until September 30, 2025, but only those parties who submitted their notice of intent to appear during the hearing will be able to submit comments.

On July 1, 2025, OSHA published a number of proposed rules amending existing regulations in order to remove duplicate requirements between specific standards and the respiratory protection standard. Proposed rule updates include those regulating lead, asbestos, benzene, cadmium, ethylene oxide, and formaldehyde, to list a few. In addition, OSHA proposes changes to its construction illumination standard. Comments for all these proposed rules are due September 2, 2025.

At the end of May, OSHA updated its guidance on its site-specific targeting (SST) inspection program, which focuses on workplaces with the highest injury and illness rates. Effective immediately, the SST inspection program gathers information from employer-submitted Form 300A data, which requires employers to report the total number of job-related injuries and illnesses that occurred within the calendar year. The agency will use this data when selecting establishments for inspections. The guidance applies to general industry establishments, which includes most businesses outside of construction, maritime, and agriculture. Due to the broad scope of SST inspections, employers should prepare for increased programmed inspections and enforcement by ensuring their health and safety programs are sufficient to maintain an OSHA-compliant workplace.

Immigration Enforcement Remains a Top Priority

Under the current administration, immigration has become a top priority both in terms of enforcement and reforming existing rules and procedures. For employers, this presents challenges on both fronts. Tighter enforcement measures will require greater vigilance from human resource departments in completing and maintaining employment authorization documentation for employees. At the same time, employers may face greater difficulty hiring talent outside the United States given stricter interpretations of immigration processing rules and procedures.

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Within the federal government, the Department of Homeland Security (DHS), Immigration and Customs Enforcement (ICE), is tasked with enforcing the nation’s immigration laws. This includes conducting random audits on employers to ensure they are properly employing authorized workers. ICE Acting Director Tom Homan has stated ICE’s goal for FY2025 is 12,000 to 15,000 I-9 audits. With the passage of the latest funding bill, DHS is slated to receive $165 billion in funding and is authorized to hire 10,000 new ICE agents; thus, this audit goal is well within reach given the additional resources provided to the Department. Additionally, employers can expect an increase in worksite raids. 

More potential fuel for increased audits is the expansion of the Corporate Whistleblower Awards Pilot Program (CWAPP), which has now been broadened under the administration to include immigration law violations, customs fraud, and similar abuses. In effect, the administration has created a new process in which financial incentives now exist to encourage employees, past or present, to come forward with credible allegations involving employer misconduct regarding federal immigration compliance, including the misuse of visa programs, failure to properly maintain I-9 forms, and systemic immigration fraud. 

Our expectation is that employers must be prepared, more than ever before, to face a potential audit from DHS and should take steps to ensure their I-9 records are up-to-date and compliant. The recommended way to be prepared in the event of such an audit is for an employer to conduct an informal I-9 audit under the direction of an immigration compliance attorney. Through such an audit, employers can discover any existing errors and seek to remedy them as much as possible, reducing the possible risk of higher fines if audited by the government. Further, increased enforcement of the I-9 process can lead to greater investigatory enforcement moving forward. 

With respect to immigration benefits, we have already seen the administration end a number of work authorization programs for individuals in the United States. This has already and will continue to limit the available legal workforce needs for U.S. companies. Terminated programs include the Humanitarian Parole for Cuban, Haitian, Nicaraguan, and Venezuelan nationals, as well as Temporary Protected Status (TPS) for nationals from Afghanistan, Cameroon, Venezuela, Haiti, Nepal, Nicaragua, and Honduras. Employers should pay attention to any updates from DHS and federal court litigation when it comes to the ultimate work authorization end date for such employees to ensure they do not run afoul of the law. 

Other changes, both implemented and proposed, cover various aspects of immigration processing. The majority of these changes slow the speed visas are processed by the Department of State, and likely increase scrutiny of certain application types by USCIS, resulting in delays in onboarding new foreign talent and existing employees traveling abroad. These policies include a return to mandatory interviews for most visa applicants, heightened vetting measures including social media screening for student visas, and the proposal to enact further bond requirements for certain nationals seeking to obtain B-1 business and B-2 tourist visas. 

Additionally, there are reports of additional scrutiny of TN (USCMA) and L-1 intracompany transfer visas processed by customs officials at the U.S.-Canada and U.S.-Mexico borders. But more important is a recent proposal from DHS to implement a “weighted selection process” for H-1B visa selections. While details have not been released, the intent will likely be to encourage employers to offer higher wages to H-1B applicants to improve the odds of selection in addition to favoring more specific, highly skilled occupations over others. For businesses seeking to recruit entry-level international talent and/or staff non-tech sector roles, this may result in additional difficulty to meet operational goals. Overall, we foresee further constriction of lawful immigration programs. 

Artificial Intelligence Regulation Remains in the States

Artificial intelligence (AI) continues to revolutionize the workplace, offering both efficiency gains and complex compliance challenges. As AI-driven tools reshape hiring, management, and performance evaluation, policymakers at all levels of government are racing to keep pace. The transition from the Biden to Trump administration in 2025 ushered in a new federal approach, emphasizing deregulation and technological competitiveness. At the same time, states and localities—concerned with issues like algorithmic bias, transparency, and worker surveillance—have taken the lead in shaping AI-related employment law. For employers, this evolving patchwork of regulations raises important questions about risk, responsibility, and compliance in the age of AI.

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Federal Level. The Trump administration has adopted a deregulatory, pro-innovation approach to AI policy, with a strong focus on preserving American dominance in the field. On January 21, 2025, President Trump issued Executive Order 14148, titled “Initial Recissions of Harmful Executive Orders and Actions,” which revoked numerous Biden-era AI directives. The Trump administration has also rescinded most AI-related guidance issued by federal labor and employment agencies such as the DOL, EEOC, and NLRB. Most recently, on July 23, 2025, the White House unveiled the “America’s AI Action Plan,” a blueprint that prioritizes deregulation, free-market innovation, and national competitiveness over workforce protections or ethical constraints.

Congressional (In)actions. President Trump has Republican majorities in both houses of Congress, which puts the Trump White House in a powerful position to advance AI legislative priorities. With Republican majorities in both chambers, the Trump administration holds a favorable position to advance its AI legislative agenda. The most notable legislative development was the House Reconciliation Bill, which initially included a sweeping 10-year moratorium on state and local regulation of AI systems. Critics warned that such a moratorium would undermine states’ ability to protect workers from algorithmic discrimination and surveillance. On July 1, 2025, the Senate voted 99-1 to strike the moratorium from the bill, allowing state-level AI regulations to proceed.

State Level. Most AI regulatory efforts are continuing to occur at the state level. In 2024 alone, more than 40 states introduced AI-related bills, including discrimination and automated employment decision-making. Illinois passed HB 3773 (effective January 1, 2026), which prohibits the use of AI systems that produce discriminatory outcomes and requires employers to notify workers when AI is used in employment decisions. Similarly, Colorado enacted SB 205 (effective February 1, 2026), mandating impact assessments, AI usage disclosures, and certain bias mitigation measures. Also noteworthy: California has enacted new regulations effective October 1, 2025, introducing robust safeguards against potentially discriminatory uses of AI and establishing stringent requirements for developers and deployers of automated-decision tools. These and other measures signal a growing trend toward state-driven governance in the employment AI space—particularly as federal oversight wanes. 

Conclusion

In less than nine months, the new administration has made dramatic changes in labor and employment policy, in some cases setting almost 60 years of policy on its ear. And at least as of this writing, there does not appear to be any indication that momentum is letting up. Rather, we predict that in the months to come we may see even more dramatic changes, as sub-cabinet positions are filled and administrative enforcement agencies see restored quorums. Moreover, with midterm congressional elections on the horizon, and the partisan control of Congress highly uncertain, there’s an even greater incentive for the administration to try to enact its agenda as quickly as possible. While it is impossible to predict exactly what form these policy changes may take, it is nearly certain that they will include novel proposals seemingly designed to test the limit of executive branch authority. Given this dramatic uncertainty—and the speed at which these actions are unfolding—employers are advised to maintain situational awareness through close consultation with counsel.