Quick Hits

• The California Court of Appeal upheld a ruling that a car dealership’s “flag bonus pay” system for service technicians complies with California’s “no borrowing” rule.
• The court distinguished this compensation structure from the previously unlawful “piece rate basis” system because it paid a guaranteed hourly rate for all clocked hours (independent of productivity) that fully satisfied minimum-wage and rest-break requirements, plus a true productivity bonus on top.
• The court found deficiencies with the plaintiffs’ PAGA claim, emphasizing the necessity for proper notice letters detailing “facts and theories” for any pursued claims under California’s Labor Code.

On November 18, 2025, the California Court of Appeal, Second Appellate District, published its decision in Mora v. C.E. Enterprises, Inc. The court affirmed a ruling in favor of a Simi Valley car dealership that the “flag bonus pay” system did not violate the “no borrowing rule” and did not otherwise violate Labor Code Section 226.2. The ruling came after a bench trial in a wage-and-hour and PAGA case brought by two former service technicians of the dealership.

On appeal, the technicians argued the trial court was wrong in finding that the dealership’s compensation structure for service technicians, which paid technicians double the minimum wage rate plus “flag bonus pay” based on hours they spent working on service tasks, did not violate California’s “no borrowing” rule or Labor Code Section 226.2, as it was interpreted by the California Fourth District Court of Appeal in Gonzalez v. Downtown LA Motors, LP.

The Hourly Pay Plan

The dealership implemented a compensation structure in December 2014 that pays service technicians at least double the minimum wage for all hours recorded on a biometric time clock, allowing technicians to earn a “flag bonus pay.” This system replaced a former “piece rate basis” based on the number of “flag” hours technicians worked, meaning hours they spent performing service tasks, after such a system was found to be unlawful in Gonzalez.

According to the decision, the “flag bonus pay” system allowed technicians to track “flag” hours for hours worked performing specific tasks and provided them the opportunity to be paid “‘flag bonus pay’ if the flag hours they separately record[ed], multiplied by the dollar amount of their assigned flag rate, exceed[ed] their regular and overtime hourly earnings.”

Compliance With the ‘No Borrowing Rule’

Under the “no borrowing rule,” employers must pay employees the minimum wage for all hours worked, regardless of the compensation structure (e.g., piece-rate or commission). The rule means employers cannot average the wages earned from productive tasks to cover nonproductive time or rest periods. Each hour worked must be compensated at or above the minimum wage independently.

In Mora, the Second Appellate District found that, unlike the compensation plan in Gonzalez, which averaged piece-rate payments to meet minimum wage requirements, the dealership’s plan paid employees for every hour recorded on the biometric clock and provided additional flag bonus pay for efficiency. Instead, the court aligned its analysis with the Supreme Court of California’s “no-borrowing” framework, under which an employer must pay at least the minimum wage for each hour while still honoring separate contractual units of pay.

The court further cited a recent 2025 Ninth Circuit decision that found an hourly-plus-bonus structure, where the employer always paid hourly wages and layered a piece-rate bonus on top, was lawful under Gonzalez.

PAGA Claims

The plaintiffs also raised PAGA claims on behalf of other employees based on the alleged violations of the Labor Code, including failures to pay overtime and provide accurate wage statements. The court emphasized that PAGA claims still require: (1) a notice letter that actually discloses the “facts and theories” later pursued, and (2) admissible, explained evidence at trial tying alleged payroll “deficiencies” to actual Labor Code violations. The court criticized the plaintiffs for simply presenting the trial judge with thousands of unanalyzed time and payroll records and expecting the court to scour them for violations.

Additionally, the court found the plaintiffs’ Labor and Workforce Development Agency (LWDA) letter insufficient regarding other sales and lube technicians, who were paid differently, and faulted their trial presentation for presenting thousands of records to the court without providing the judge with concrete examples to prove any underpayment.

Key Takeaways

The Mora decision provides helpful support for California employers seeking to implement and maintain legal and effective incentive-based compensation systems designed to reward and incentivize productive employees, such as the “flag bonus pay” system used by the dealership in the case, and highlights some key considerations for employers. Specifically, employers may want to ensure that:

• all hours under the employer’s control are captured on a reliable timekeeping system and paid at or above the applicable hourly floor (including overtime premiums, where applicable, and any tool-rate requirements); and
• any “flag,” “piece,” or “commission” component is structured as true extra compensation, not as a mechanism that makes the employee whole for non-productive time or rest periods.

Further, employers defending PAGA cases may want to keep in mind that plaintiffs still bear the burden to prove actual violations, and courts will enforce both PAGA’s exhaustion requirements and the ordinary evidentiary and record-sufficiency rules.

Ogletree Deakins’ California Class Action and PAGA Practice Group will continue to monitor developments and will provide updates on the California, Class Action, and Wage and Hour blogs as additional information becomes available.

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Quick Hits

• Jurisdictions such as California, New York City, Colorado, Illinois, and the European Union (EU) variously require (or plan to require) and encourage bias testing, notices, transparency, and, in some cases, public summaries. AI involvement can create substantial legal risk, even when humans make the final decisions; AI-influenced scores, rankings, or screens can still be treated by regulatory authorities as decision-making, triggering validation, bias-testing, notice, and transparency duties—with “cutoff” uses increasing regulatory scrutiny.
• Legally privileged bias audits can anchor AI governance efforts by channeling audits through legal counsel, maintaining an inventory and classification of tools, setting clear policies and vendor obligations, conducting ongoing monitoring and remediation, and preserving records supporting job-relatedness, business necessity, and “less-discriminatory alternatives” analyses.

Background

AI and algorithmic tools now permeate modern workforce management, touching everything from applicant recruitment and resume screening to onboarding, performance reviews, development, promotions, scheduling, and retention. The legal environment surrounding these systems is expanding rapidly and unevenly, with places such as California, New York City, Colorado, Illinois, and the EU adopting differing approaches. Approaches vary in each of the current or pending laws, ranging from binding requirements to soft‑law guidance. Importantly, liability can arise even when a person signs off on the outcome: regulators and courts may view AI-generated rankings, scores, or screens as part of the employment decision itself, while the use of rigid thresholds or “cutoffs” can invite heightened scrutiny.

Against this backdrop, the regulatory picture is still taking shape: a patchwork of municipal, state, federal, and global measures that differ in scope, definitions, and timing. Emerging frameworks impose varied governance, transparency, and recordkeeping obligations, while existing antidiscrimination, privacy, and consumer reporting laws continue to supply enforcement hooks. Agencies are issuing guidance and bringing early cases, while private plaintiffs are testing theories that treat algorithmic inputs as part of employment decisions, even when human review is involved. Penalties and remedies range from administrative fines to mandated disclosures and restrictions on use, with some regimes claiming extraterritorial reach and short transition periods, creating real uncertainty for multistate and global employers.

Scope and Focus of Auditing

Anti-bias auditing begins by examining whether the tool’s results differ for protected groups at each stage of the process—for example, with regard to resume scores, rankings, who receives interviews, who passes assessments, and who ultimately gets hired. Statistical findings that suggest adverse impact are a warning light, not the finish line. From there, examining the training and reference data, features that might act as stand-ins or “proxies” for protected traits, how features are built, the score cutoffs applied, any settings by location or role, and how recruiters and managers actually use the output or tool are important steps. If impact is found to be present, the next step involves assessing business necessity and whether less discriminatory ways exist to achieve the same goal, considering specific fixes, such as adjusting thresholds, swapping or removing features, training to improve use or consistency, or changing when or how the tool is used.

Effectiveness auditing assesses whether an AI tool actually enhances decision-making in your specific context. It tests if the system performs as advertised, outperforms your current process, and behaves consistently across roles, teams, sites, and time. Practically speaking, that means benchmarking model outputs against structured human evaluations, checking post-decision outcomes (such as performance, retention, quality and error rates, and downstream corrective actions), and validating that the factors driving recommendations are job‑related and predictive of success.

Effectiveness is inseparable from fairness. A tool that is fast or efficient but unevenly accurate across protected groups—or that relies on features correlated with protected traits—can create legal and operational risks. Evaluating accuracy, stability, and business impact, together with adverse-impact metrics, ensures that “better” does not simply mean “cheaper or quicker” and helps surface situations where apparent gains are driven by biased error patterns. In short, effectiveness auditing assesses whether a tool works, for whom it works, and whether it works for the right job‑related reasons.

Best Practice Considerations

An effective AI governance program brings together the applicable stakeholders for each deployment, with legal, HR, and IT at the core. Legal ensures regulatory alignment, privilege where appropriate, defensible documentation, and coordination across antidiscrimination, privacy, and consumer-reporting regimes. HR anchors job-relatedness, consistent application across roles and locations, and integration with established hiring and performance practices. IT is responsible for system architecture, security, access controls, data quality, monitoring, and change management. Around this core, additional contributors can be included as the use case demands.

Leading With Privilege

A foundational best practice involves starting every significant evaluation, audit, and testing effort with counsel. That means legal scopes the questions, engages the right experts, and directs the work so the analysis is covered by attorney-client privilege and/or work product protections. Following completion of the privileged assessment and agreement on corrective actions, nonprivileged regulatory summaries or disclosures can be prepared as a separate project. This preserves privilege over the analysis while ensuring timely compliance with applicable notice and transparency obligations.

Knowing Your Tools

Most organizations rely on more AI and algorithmic tools than they recognize, so it is sound practice to maintain a living inventory across the talent life cycle—including sourcing databases, resume screens, rankings, assessments, automated interviews, predictive models, and HR analytics—and to support meaningful oversight within the governance program by maintaining the inventory’s currency through defined change-management triggers.

For each tool, consider recording the core facts of use, impact, data, and ownership, and relying on a single inventory as the backbone for audits, governance, vendor oversight, incident response, and regulatory disclosures.

Setting Clear Rules

Setting clear rules means writing down and enforcing plain-language policies for the use of AI. That includes providing for notice (and consent where applicable), meaningful human review and appeal, data minimization and retention, and security, and making sure vendor contracts protect the organization’s legal risks with regard to audit rights, data access, security parameters, explainability documentation, and remediation obligations if problems are found.

Monitoring and Fixing

Effective systems risk management may require ongoing monitoring at set intervals, with some laws mandating periodic reviews. Consider defining clear thresholds and triggers for when to retest and remediate, and preparing a response playbook covering feature or cutoff changes, deployment adjustments, reviewer retraining, and vendor recalibration. Legal may want to continue managing the process so that analytic iterations and corrective actions remain under privilege.

Documenting to Defend

Keeping contemporaneous records that demonstrate job-relatedness, business necessity, and, where adverse impact appears, any evaluation of less discriminatory alternatives, while preserving the who/what/why of human reviews (including reasons for following or overriding AI outputs) with clear, plain-language explanations of how each tool works, is critical. Robust, contemporaneous documentation can significantly enhance a program’s defensibility in regulatory inquiries and litigation.

Next Steps

Auditing AI for bias in employment decision-making is now a critical part of AI governance and risk management. Employers that implement privileged audits, robust governance, and continuous monitoring paired with transparency, human-in-the-loop controls, and disciplined documentation can harness AI’s benefits while reducing the risk of discriminatory outcomes and regulatory exposure.

Ogletree Deakins’ Cybersecurity and Privacy, Government Contracting and Reporting, Technology, and Workforce Analytics and Compliance Practice Groups will continue to monitor developments and will provide updates on the Cybersecurity and Privacy, Employment Law, Government Contracting and Reporting, Multistate Compliance, State Developments, Technology, and Workforce Analytics and Compliance blogs.

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Quick Hits

• Effective January 1, 2026, New York State will raise the minimum wage to $17.00 for downstate employees and $16.00 for upstate employees
• Along with the minimum wage increases, there will be adjustments to the cash wage and tip credits for tipped service employees, as well as revised meal and uniform credit rates to reflect the new wage structure.
• The minimum salary thresholds for the executive and administrative employee minimum wage exemption are also set to increase for both downstate and upstate employees.

Minimum Wage Increase

New York has separate minimum wage rates for employees in downstate New York, which encompasses New York City, Long Island (Nassau and Suffolk Counties), and Westchester County, and for employees in upstate New York (the remainder of the state). The hourly minimum wage rates for both downstate and upstate and employees will increase by $0.50 per hour in 2026.

Effective January 1, 2026, the rate for downstate employees will increase to $17.00 per hour from $16.50 per hour, and for upstate employees, it will increase to $16.00 per hour from $15.50 per hour. Along with the minimum wage rate increases, there will be adjustments to the minimum cash wage for tipped service employees and the employer tip credits.

After 2026, the minimum wage will adjust for inflation based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) for the Northeast Region. Since January 1, 2024, the minimum wage rate for non-tipped fast food workers at chain restaurants (those with more than thirty locations nationally) has been the same as that of other non-tipped workers.

Meal Credit Adjustments

New York law allows employers to take a credit for meals provided to employees as part of employees’ wages valued up to specific rates. However, according to the New York Hospitality Industry Wage Order issued by the New York Department of Labor (NYDOL), the meals must meet strict requirements to qualify for the wage credit.

Meals must be furnished to employees at times when they customarily eat. Further, meals must include at least one type of food from four categories: “(1) fruits or vegetables; (2) grains or potatoes; (3) eggs, meat, fish, poultry, dairy, or legumes; and (4) tea, coffee, milk or juice.”

Uniform Credit Adjustments

New York law provides that where an employer “does not maintain required uniforms for any employee, the employer shall pay the employee” a rate in addition to the employee’s regular rate of pay to cover washing, ironing, dry cleaning, or repair of mandatory uniforms. The weekly rate increases with the number of hours worked. Employees who work more than thirty hours are paid the “High rate,” those who work more than twenty but up to thirty hours are paid the “Medium rate,” and those who work twenty hours or less are paid the “Low rate.”

Employers are not required to make uniform maintenance payments if the required uniforms are “(1) are made of ‘wash and wear’ materials; (2) may be routinely washed and dried with other personal garments; (3) do not require ironing, dry cleaning, daily washing, commercial laundering, or other special treatment; and (4) are furnished to the employee in sufficient number, or the employee is reimbursed by the employer for the purchase of a sufficient number of uniforms, consistent with the average number of days per week worked by the employee.” Employers are also not required to pay for uniform maintenance if the employee “chooses not to use the employer’s service.”

Executive and Administrative Salary Exemption

Employees who work in an “[e]xecutive” or “administrative” capacity and who are paid a “salary” not less than the thresholds set by state regulations may be exempt from the state’s overtime pay requirements. The thresholds are again set to increase for both downstate and upstate employees, under a three-year increase set by the New York Department of Labor.

Effective January 1, the thresholds will increase:

New York City, Long Island (Nassau and Suffolk Counties), and Westchester County

• $1,275.00 ($66,300 per year), up from the current $1,237.50 per week

Remainder of New York State

• $1,199.10 per week ($62,353.20 per year), up from $1,161.65 per week

New York law also makes employees who “[w]ork in a bona fide … professional capacity” (ellipsis in original) overtime exempt if they meet the specific requirements. However, those requirements do not include specific salary thresholds for individuals, such as those working in an executive or administrative capacity. While there is no minimum salary threshold under New York for the profession exemption, the salary minimums under the Fair Labor Standards Act (FLSA) apply. The federal minimum for exempt professional employees under FLSA is $684 per week or $35,568 per year. That minimum has remained flat since 2019 as a U.S. Department of Labor (DOL) rule that had planned increases was struck down in court in November 2024.

Next Steps

Employers across New York State may want to take steps to prepare for these upcoming increases. Importantly, while the 2026 minimum wage increase marks the end of three years of set annual increases, the minimum wage rate will be indexed to inflation, with adjustments based on the CPI-W for the Northeast Region. The NYDOL reminded employers that minimum wage theft is considered a crime under New York State penal law and could result in prosecution.

Ogletree Deakins’ New York offices will continue to monitor developments and will provide updates on the Hospitality, New York, Retail, and Wage and Hour blogs as additional information becomes available.

Further information on minimum wage rates and requirements can be found in the Ogletree Deakins Client Portal, including minimum wage and minimum wage tip credit law summaries. (Full law summaries are available for Premium-level subscribers; Snapshots and Updates are available for all registered client-users.) For more information on the Client Portal or a Client Portal subscription, please reach out to clientportal@ogletree.com.

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Quick Hits

• USCIS will continue to accept adjustment of status filings based on the Dates for Filing chart in the December 2025 Visa Bulletin.
• The December 2025 Visa Bulletin shows some advancement from last month’s bulletin for employment-based categories for the final action dates.
• All employment-based categories for dates for filing remain unchanged, except for fourth preference for Certain Religious Workers and fifth preference unreserved.

The final action dates for several categories advance slightly in the December 2025 Visa Bulletin:

• EB-1: All countries remain current in December except for China, which advances by one month to January 22, 2023, and India, which advances by one month to March 15, 2022.
• EB-2: All countries advance by two months to February 1, 2024, except for China, which advances by two months to June 1, 2021, and India, which advances by six weeks to May 15, 2013.
• EB-3: All countries advanced by two weeks to April 15, 2023, except for China, which advances by one month to April 1, 2021, and India, which also advances by one month to September 22, 2013.
• Certain Religious Workers: All countries changed from unauthorized to September 1, 2020.
• EB-5: All countries remain current in December, except for China, which advances seven months to July 15, 2016, and India, which advances by five months to July 1, 2021.

Final Action Dates for Employment-Based Visa Applications

Source: U.S. Department of State, December 2025 Visa Bulletin, Final Action Dates Chart

The December 2025 Visa Bulletin shows no change from last month’s bulletin for employment-based categories for Dates for Filing, except for Certain Religious Workers, which changed for all countries from unauthorized to February 15, 2021, and the EB-5 unreserved category for China, which advanced by three weeks to July 22, 2016.

Dates for Filing of Employment-Based Visa Applications

Source: U.S. Department of State, December 2025 Visa Bulletin, Dates for Filing Chart

Key Takeaways

Applicants who became eligible to file their adjustment requests in November 2025 under the Dates for Filing Chart will have at least another month to submit their applications.

Ogletree Deakins’ Immigration Practice Group will continue to monitor developments and will publish updates on the Immigration blog as additional information becomes available.

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Senate Committee Postpones Vote on NLRB. This week, the U.S. Senate Committee on Health, Education, Labor and Pensions (HELP) was forced to postpone a scheduled vote to advance the nomination of Scott Mayer to be a member of the National Labor Relations Board (NLRB). Republicans hold a slim 12–11 voting majority on the HELP Committee, meaning that a loss of just one vote could make it challenging to approve any nominee. Mayer’s nomination thus lags behind fellow Board nominee James Murphy and NLRB general counsel nominee, Crystal Carey, both of whom have already been approved by the committee and await a vote on the Senate floor.

President Trump Sends EEOC GC Nominee to Senate. President Donald Trump has nominated management attorney M. Carter Crow to serve as general counsel of the U.S. Equal Employment Opportunity Commission (EEOC). Given the administration’s theory that the Commission is not an independent agency but rather firmly within the executive branch, if confirmed, Carter can likely be expected to pursue an enforcement agenda that tracks with EEOC Chair Andrea Lucas’s priorities (which align with those of the administration). The Commission’s previous acting general counsel, Andrew Rogers, is now the administrator of the Wage and Hour Division at the U.S. Department of Labor (DOL). Principal deputy general counsel, Catherine Eshbach, is currently performing the duties of the general counsel at the Commission. T. Scott Kelly, Nonnie L. Shivers, James J. Plunkett, and Zachary V. Zagger have the details.

Senator Seeks Changes to OPT. According to the administration’s Spring 2025 Unified Agenda of Regulatory and Deregulatory Actions, in September of this year, the U.S. Department of Homeland Security’s (DHS) Immigration and Customs Enforcement (ICE) was scheduled to issue a proposed regulation to amend the Optional Training Practical (OPT) Program. The program provides F-1 student visa holders with one year of work authorization after graduation, and an additional two years if they graduate with a STEM degree. In anticipation of the pending regulatory proposal, Senator Eric Schmitt (R-MO) sent a letter to Secretary of Homeland Security Kristi Noem and U.S. Citizenship and Immigration Services (USCIS) Director Joseph Edlow, encouraging them to “conduct a thorough review of the OPT program to begin the process of either reforming or ending OPT.” Senator Schmitt reasoned that “OPT was created (and then expanded) by unelected bureaucrats in the executive branch, without the input or approval of Congress, circumventing the caps and limits that govern employment-based visas” and can therefore “be overhauled or ended by executive action.”

House Committee Examines E-Verify. On November 19, 2025, the U.S. House of Representatives’ Committee on Education and the Workforce’s Subcommittee on Workforce Protections held a hearing, titled, “E-Verify: Ensuring Lawful Employment in America.” As the title implies, the hearing explored ways to improve the E-Verify system while considering a nationwide mandate, with a particular focus on the construction industry. Witnesses noted that continuing errors within the E-Verify system, as well as identity theft and fraud, need to be addressed. They further suggested that E-Verify automatically send alerts when an employee no longer has work authorization, and that compliance assistance should be provided to make the system accessible to and work for small businesses. Other witnesses warned that a nationwide E-Verify mandate could have negative impacts on workers and the broader economy. The Legal Workforce Act (H.R. 251), a bill that was introduced in January 2025, would mandate E-Verify for all employers.

House Committee Advances Employment Legislation. As a follow-up to its March 25, 2025, hearing on the future of the Fair Labor Standards Act (FLSA), on November 20, 2025, the House Committee on Education and the Workforce advanced the following FLSA-related bills:

• Working Families Flexibility Act of 2025 (H.R. 2870). This bill would provide private-sector employees with the option of choosing paid time off instead of overtime pay. Republicans have introduced a companion bill in the Senate. A version of the bill passed the House of Representatives in 2017.
• Tipped Employee Protection Act (H.R. 2312). This bill would amend the FLSA to clarify the definition of “tipped employee.” Accordingly, the bill would limit the DOL’s ability to issue regulations interpreting the definition, such as the 2021 “80/20” regulation.
• Ensuring Workers Get PAID Act of 2025 (H.R. 2299). This bill would codify the DOL’s Payroll Audit Independent Determination (PAID) program, which incentivizes employers to audit their payroll and leave practices and self-report mistakes to the DOL.

The Buzz will be monitoring these bills and will provide updates should they gain any traction in Congress.

Susan B. Anthony, ‘Criminal.’ On November 18, 1872, women’s rights activist and suffragist, Susan B. Anthony, was arrested in her hometown of Rochester, New York, for voting in that year’s presidential election (in which incumbent Ulysses S. Grant defeated Horace Greeley). At the time, New York law prohibited women from voting. While not expecting to be arrested—Anthony thought she would be denied the opportunity to cast a ballot and would then file a lawsuit—she used the period between her arrest and trial date to generate publicity for the women’s suffrage movement. Anthony argued that the recently ratified 14th Amendment guaranteed women the right to vote, and she turned her attorney’s oral argument at a pretrial hearing into a pamphlet that she distributed to newspapers. Associate Supreme Court Justice Ward Hunt had responsibility over the federal court in New York and presided over the trial. On June 18, 1873, Hunt issued a directed verdict against Anthony and ordered her to pay a $100 fine, which she never paid. Anthony’s arrest and trial were galvanizing moments in the women’s suffrage movement and the broader movement for women’s rights, though the goal of securing voting rights for women in the United States was not fully realized for another forty-five–plus years, when the 19th Amendment to the U.S. Constitution was ratified in 1920, and several more decades when women of color gained the right to vote throughout the United States.

The Buzz will be on hiatus for the Thanksgiving holiday and will return on December 5, 2025.

Quick Hits

• The IRS and Treasury Department recently published guidance to clarify how employees may calculate their tax deduction for tips and overtime pay for the 2025 tax year when they have limited information.
• The guidance shows examples of common situations, such as a bartender with reported and unreported tips, a self-employed travel guide who received tips on digital payment apps, and a law enforcement employee who is paid overtime on a “work period” basis of fourteen days.

Under the 2025 budget reconciliation bill, workers who customarily and regularly receive tips can deduct up to $25,000 in tips from their income subject to federal income tax starting on January 1, 2025, through December 31, 2028. The deduction does not apply to workers earning more than $150,000 per year (for single filers) or $300,000 (for joint filers). The IRS issued a list of eligible tipped occupations, including bartenders, waitstaff, cooks, dishwashers, bakers, gambling dealers, dancers, musicians, concierges, hotel housekeeping staff, hairdressers, barbers, massage therapists, and nail technicians.

Similarly, workers can deduct up to $12,500 or $25,000, depending on their filing status, in overtime pay from their income subject to federal income tax, starting on January 1, 2025, through December 31, 2028. This deduction applies only with respect to the overtime premium required under the Fair Labor Standards Act (FLSA). 

Reporting Requirements for Employers

To enable their employees to take individual tax deductions, employers are required to report qualified overtime compensation and tips on the employees’ Forms W-2. However, the IRS granted transition relief for this reporting requirement for tax year 2025, stating that employers will not be penalized for failing to report cash tips and overtime compensation in the manner required by the latest federal budget reconciliation bill. The IRS still encourages employers to make the information available to their employees in 2025 through an online portal, additional written statements, or (in the case of overtime compensation) in Box 14 of Form W-2.

Reporting Tips

The IRS guidance released for individual taxpayers instructs them on how to use the tax information and tips data already available to them to claim the individual tax deduction for cash tips when their employer does not provide a separate reporting statement for the cash tips.

For example, a restaurant server whose 2025 Form W-2, box 7, reports $18,000 in tips can deduct a total of $18,000 in income for tax year 2025.

Meanwhile, a bartender reports $20,000 in tips on Form 4070 and $4,000 of unreported tips on Form 4137, line 4. His Form W-2 reports $20,000 in box 1 and $15,000 in box 7. He can use either the $15,000 in box 7 of Form W-2, or the $20,000 of tips reported on Form 4070 in determining the amount of qualified tips for tax year 2025. Either way, he also can include his $4,000 in unreported tips from Form 4137, line 4, in the tax deduction.

If a self-employed travel guide received $7,000 in tips through digital payment apps, he can include that amount in calculating his tax deduction for tips, if he has a log that shows each date, customer, and tip amount.

Reporting Overtime

Similarly, the IRS guidance instructs employees on how to claim the individual tax deduction for qualified overtime compensation when their employers do not provide a separate reporting statement of qualified overtime compensation. “Qualified overtime compensation” is defined as overtime pay required under Section 7 of the Fair Labor Standards Act of 1938 (FLSA)—that is, pay for hours worked in excess of forty in a workweek, at a rate not less than one and one-half times the regular rate of pay.

Individual taxpayers must first make a reasonable effort to determine whether they are considered FLSA-eligible employees, which may include asking their employers about their status under the FLSA. The IRS then instructs FLSA-eligible individual taxpayers to calculate their own amount of qualified overtime compensation based on documents, such as earnings or pay statements, invoices, or similar statements that support the determination. Employees are instructed to use the available overtime payroll information and apply an FLSA overtime premium calculation to determine qualified overtime compensation.

For example, if an employee has a pay statement at year’s end that reports the aggregate overtime compensation paid at a rate of one and one-half times earned for work in excess of forty hours in a week, the employee may calculate qualified overtime compensation by dividing the aggregate overtime compensation amount by three to determine the FLSA premium that is considered qualified overtime compensation. The aggregate overtime compensation amount would be divided by four if the employee was paid at a two-times rate.

Meanwhile, a state government employee received compensatory time at a rate of one and a half hours for each overtime hour worked. She was paid $4,500 for compensatory time off based on her overtime. She can include $1,500, or one-third of these wages, to calculate the tax deduction for overtime pay.

Next Steps

To reflect the changes in the 2025 budget reconciliation bill, the IRS is still in the process of updating Forms W-2, 1099-NEC, 1099-MISC, and 1099-K. Therefore, no changes will appear on the 2025 Form W-2, Form 1099-NEC, Form 1099-MISC, or Form 1099-K.

The IRS has encouraged employers to provide tipped employees with occupation codes and separate accountings of cash tips to help them correctly claim the deduction for qualified tips for tax year 2025. Likewise, it has encouraged employers to provide employees with a separate accounting of overtime pay, allowing them to properly claim a deduction for qualified overtime pay for tax year 2025.

However, employees now have instructions from the IRS on how to calculate their own qualified overtime compensation and cash tips that are eligible for individual income tax deductions regardless of their employers’ tax information reporting.

Ogletree Deakins’ Employment Tax Practice Group and Wage and Hour Practice Group will continue to monitor developments and will provide updates on the Employment Tax and Wage and Hour blogs as new information becomes available.

Michael K. Mahoney is a shareholder in Ogletree Deakins’ Morristown office.

Stephen Kenney is an associate in Ogletree Deakins’ Dallas office.

This article was co-authored by Leah J. Shepherd, who is a writer in Ogletree Deakins’ Washington, D.C., office.

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Employers first determine whether they must keep Occupational Safety and Health Administration (OSHA) injury and illness records and, if so, which forms apply. Most employers must maintain the OSHA Form 300 Log (“Log” or “300”), prepare an OSHA Form 301 Incident Report (301) for each recordable case, and prepare and post the OSHA Form 300A Annual Summary (300A).

Employers with ten or fewer employees in the prior year and those in industries listed in OSHA’s partial-exemption appendix are generally exempt from routine recordkeeping duties but must still report severe events and respond to government data requests, such as those from the Bureau of Labor Statistics (BLS).

Each recordable case must be entered on the Log and documented on a 301 within seven calendar days of receiving information that the case is recordable. Employers must post the 300A from February 1 through April 30 and retain the 300, 300A, and 301 for five years, updating the 300 during that period if new information comes to the employer that suggests an entry was erroneous.

Quick Hits

• Employers must determine if they need to keep OSHA injury and illness records, which include the OSHA Form 300 Log, the OSHA Form 301 Incident Report for each recordable case, and the OSHA Form 300A Annual Summary, which has to be posted from February 1 through April 30.
• Determining whether a case is recordable involves confirming an injury or illness, assessing work-relatedness, identifying if it is a new case, and applying general recording criteria such as death, days away from work, or medical treatment beyond first aid.
• Employers must ensure accurate recordkeeping, involve employees in the process, and provide access to records while maintaining privacy and data integrity, especially for special recordkeeping categories like hearing loss, needlestick injuries, and privacy concern cases.

Determining Whether a Case Is Recordable and Work-Related

Determining whether a case is recordable follows a structured sequence that begins with confirming that an injury or illness has occurred. OSHA defines “injury or illness” broadly as an “abnormal condition or disorder,” acute or chronic, that reflects an adverse change of some significance; normal end‑of‑day fatigue or mood changes are not injuries or illnesses.

Employers next determine work-relatedness under OSHA’s geographic presumption that events or exposures in the work environment are work-related unless a specific regulatory exception applies. Exceptions include symptoms arising at work that result solely from a nonwork event, voluntary wellness or recreational activities, personal tasks outside working hours, personal food consumption, self‑medication for a nonwork condition, and common colds or influenza. Work performed at home is recordable only when the injury or illness occurs while the employee is performing paid work and is directly related to the performance of that work rather than the home environment. OSHA’s website includes many answers to “frequently asked questions” and standard interpretations that help employers determine whether a work-related injury or illness occurred.

New Cases vs. Continuations of Previously Recorded Conditions

If the case is work-related, employers determine whether it is a new case rather than a continuation of a previously recorded condition. A new case exists when the employee has not previously experienced an injury or illness of the same type affecting the same body part, or when the employee had fully recovered, and a new workplace event or exposure caused the condition to recur. Chronic diseases that persist regardless of new workplace exposure are recorded once, while sensitization conditions that flare with new exposures are recorded when those exposures occur. If the case is new and work-related, employers apply the general recording criteria: death; one or more calendar days away from work; restricted work or job transfer; medical treatment beyond first aid; loss of consciousness; or a significant diagnosed injury or illness such as a punctured eardrum, a fractured rib, or a broken toe.

Medical Treatment vs. First Aid

Distinguishing medical treatment from first aid is central to consistent and compliant recordability.

Medical treatment includes the management and care of a patient to combat disease or disorder and excludes diagnostic procedures and observation-only visits. OSHA provides an exclusive list of first aid measures that are never medical treatment, regardless of who provides them.

First aid includes nonprescription medicines at nonprescription strength, cleaning and bandaging wounds, butterfly bandages and Steri‑Strips, hot or cold therapy, non‑rigid supports, temporary immobilization for transport, draining a blister, removing superficial splinters, finger guards, massage as a standalone measure, and drinking fluids for heat stress. Treatments not on the first‑aid list, such as sutures, tissue adhesives, prescription medications, physical therapy, or any wound‑closure device other than butterfly bandages or Steri‑Strips, are medical treatment. The definition of what constitutes first aid tends to shift and narrow over time, so employers are encouraged to review OSHA’s website to ensure that the current definition meets their understanding of the definition.

Counting Days Away and Days of Restriction or Transfer

Counting days away and days of restriction or transfer requires careful application of OSHA’s rules. Employers record calendar days, including weekends, holidays, and vacation days, beginning the day after the incident. If a licensed healthcare professional recommends days away or restricted duty, the employer records the recommended days even if the employee works; if the employee stays out longer than recommended, the employer records only the recommended days. The combined total of days away and days restricted or transferred is capped at 180 for each case. Where providers disagree, employers resolve the difference by selecting the most authoritative recommendation and documenting the basis for that choice. If a recordable injury happens after July 1 of any given calendar year, the count of days away, restricted, or transferred ends at the end of that calendar year.

Special Recordkeeping Categories

Special recordkeeping categories require tailored treatment. Recordable work‑related hearing loss requires both a standard threshold shift under the noise standard and an average hearing level of 25 decibels or more at 2,000, 3,000, and 4,000 hertz in the affected ear. Needlestick injuries or cuts from sharps contaminated with another person’s blood or other potentially infectious materials are recordable as injuries regardless of other criteria, and employers must update the Log if a related infection is later diagnosed. Medical removals required by specific substance standards are recorded as days away or restricted work, as applicable. Privacy-concern cases—including injuries to intimate body parts, sexual assaults, mental illnesses, HIV, hepatitis, tuberculosis, and contaminated sharps injuries—must omit the employee’s name on the Log, with a confidential list maintained to cross‑reference case numbers to names.

Employee Involvement and Access

Employers must also ensure employee involvement and access. Employers must inform employees how to report injuries and illnesses, provide access to recordkeeping forms within specified timeframes, and ensure that reporting procedures are reasonable and nonretaliatory. Employees and their personal representatives may access the Form 301 for that employee’s case, while authorized employee representatives may access the narrative “how the incident happened” portion for cases at the establishment with personal identifiers redacted. Employers must provide records to OSHA and other authorized government representatives promptly upon request.

Key Takeaways

With the definition, work‑relatedness, new‑case status, and recording criteria resolved, employers must translate those decisions into accurate entries on Forms 301, 300, and 300A.

Part II of this series walks through each form, step by step, using information commonly at hand, and explains how to maintain objectivity, privacy, and data integrity as case outcomes evolve.

Ogletree Deakins’ Workplace Safety and Health Practice Group will provide updates on the Workplace Safety and Health blog

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Quick Hits

• The EEOC issued a one‑page technical assistance document and updated its national origin landing page, both making clear that Title VII protects all workers—including Americans—and clearly stating potential business rationales do not justify national origin discrimination or anti-American bias.
• Job ads preferring visa statuses, disparate treatment in applications, assignments, or pay, and unlawful harassment or retaliation are identified as top risk and enforcement areas in the ongoing effort to protect Americans against national origin bias.
• The technical assistance document suggests employers can expect a multi‑agency enforcement approach from the EEOC, the Department of Justice, and the Department of Labor.

Understanding the EEOC’s Action

Title VII prohibits using protected characteristics as a factor in employment decisions unless narrow exceptions exist, such as a bona fide occupational qualification. Title VII’s prohibition on national origin includes treating applicants or employees unfavorably or favorably because they are from a particular country or part of the world, due to ethnicity or accent, or because they appear to be of a certain ethnic background, even if that perception is incorrect. The EEOC’s technical assistance document makes plain that preferences for foreign workers, including preferences tied to H1-B status, can constitute unlawful national origin discrimination when they result in disfavored treatment of American workers.

Title VII bars discrimination across all aspects of employment, including hiring, firing, pay, job assignments, promotions, layoffs, training, benefits, and any other term or condition of employment. The technical assistance materials highlight several recurring risk areas:

• Job advertisements that express preferences or requirements based on national origin or visa status (e.g., “H‑1B preferred” or “H‑1B only”) are unlawful.
• Disparate treatment can arise where employers make it meaningfully harder for U.S. workers to apply or advance compared to foreign visa holders, including through more burdensome application processes or materially different criteria.
• Pay discrimination includes paying visa guest workers less than similarly situated American workers without legitimate nondiscriminatory reasons.
• Harassment based on national origin is unlawful when sufficiently severe or frequent to create a hostile work environment, or when it results in adverse employment actions; harassment can be perpetrated by supervisors, coworkers, or even customers.
• Retaliation is prohibited when employers take adverse action because a worker opposed discrimination, participated in an investigation, or filed a charge with the EEOC.

The EEOC reiterates that common business justifications do not validate national origin discrimination. Customer or client preference, perceived productivity differences, “work ethic” stereotypes, or lower labor costs—including practices tied to off‑the‑books pay or misuses of visa wage requirements—cannot lawfully support employment decisions that favor one national origin group over another or that prefer foreign workers over American workers.

Next Steps

Employers may consider promptly assessing policies and practices that may favor workers of particular national origins or visa statuses over American workers. This includes reviewing recruiting and advertising content, application, and selection processes, pay practices for similarly situated workers, and workplace conduct expectations. Training managers and recruiters on Title VII’s even‑handed protections, auditing for disparate treatment indicators, and documenting neutral, job‑related criteria for employment decisions are important steps to mitigate risk. Where immigration‑related processes intersect with employment decisions, ensure coordination with all decisionmakers to avoid policies that create national origin–based disparities.

Ogletree Deakins’ Diversity, Equity, and Inclusion Compliance, Immigration, and Workforce Analytics and Compliance practice groups will continue to monitor developments and will provide updates on the Diversity, Equity, and Inclusion Compliance, Immigration, Employment Law, and Workforce Analytics and Compliance blogs as additional information becomes available.

This article and more information on how the Trump administration’s actions impact employers can be found on Ogletree Deakins’ Administration Resource Hub.

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Quick Hits

• President Trump has nominated labor and employment M. Carter Crow as the new general counsel of the EEOC, a position that has been vacant since January 2025.
• Crow’s Senate confirmation process will likely take several weeks to months, but if confirmed, Crow would be positioned to carry out the Trump administration’s discrimination and harassment enforcement priorities.
• The nomination comes weeks after the U.S. Senate confirmed another commissioner, restoring the EEOC’s quorum and enabling it to engage in rulemaking and emphasize systemic enforcement strategies.

On November 18, 2025, President Trump nominated Crow, currently the head of the global employment and labor practice at a multinational law firm, to the U.S. Senate for confirmation as the EEOC general counsel. The nomination was received by the Senate and referred to the U.S. Senate Committee on Health, Education, Labor, and Pensions (HELP), according to the Senate website.

The EEOC general counsel position has been open since January 2025, when President Trump discharged former EEOC general counsel Karla Gilbride, a Biden appointee, in the middle of her four-year term. Former acting general counsel Andrew Rogers was confirmed as administrator of the U.S. Department of Labor’s (DOL) Wage and Hour Division last month. Catherine Eschbach, who was sworn in as EEOC principal deputy general counsel in September, a newly created position, is currently performing the duties of the general counsel.

New Enforcement Priorities

If confirmed by the Senate, Crow would enjoy more institutional authority within the Commission than former Acting General Counsel Rogers and Principal Deputy General Counsel Eshbach, who did not have the Senate’s imprimatur. In the past, a Senate-confirmed general counsel was free to pursue his or her own enforcement priorities. However, in this administration, the EEOC is viewed as an executive branch agency, rather than an independent one, so Crow can be expected to pursue an enforcement agenda that aligns closely with both President Trump’s and EEOC Chair Andrea Lucas’s priorities. This includes scrutiny of employers’ diversity, equity, and inclusion (DEI) practices, with a focus on deemphasizing disparate impact investigations and an emphasis on discrimination based on national origin or religion, particularly alleged anti-American and anti-Christian bias.

Renewed Quorum

The new EEOC general counsel nomination comes weeks after the U.S. Senate confirmed fellow Trump nominee Brittany Bull Panuccio to serve as a commissioner of the EEOC on October 7, 2025. Panuccio’s confirmation restored a quorum of three commissioners at the agency, with two being Republican appointees, including Andrea Lucas, whom the president renominated to a new four-year term and later elevated from acting chair of the EEOC to full chair.

The restoration of a quorum provides the EEOC with authority to engage in rulemaking and policymaking and issue certain guidance to further the administration’s priorities. Recent remarks by EEOC Chair Andrea Lucas and Commissioner Kalpana Kotagal, combined with the Trump administration’s budget justification for the EEOC, suggest that the agency will focus on systemic and pattern-or-practice litigation. Additionally, the EEOC’s congressional budget justification from May 2025 confirmed such a strategy.

Next Steps

Crow’s nomination marks the beginning of the sometimes arduous Senate confirmation process. The Senate HELP Committee is likely to hold a hearing in the coming weeks, where senators will have an opportunity to question Crow about his qualifications for the job and plans for the role. Committee members will then vote on whether to approve his nomination for a full vote on the Senate floor.

Overall, the process is likely to take several weeks, possibly even months. However, beginning in September of this year, Senate Majority Leader John Thune (R-SD) introduced a new en banc voting strategy for presidential nominees, which could allow Crow to be confirmed in a timelier manner, perhaps as soon as early 2026. In the meantime, questions remain about the role Eschbach will play as deputy general counsel once a general counsel is confirmed.

Ogletree Deakins’ Diversity, Equity, and Inclusion Compliance and Workforce Analytics and Compliance practice groups will continue to monitor developments and will provide updates on the Diversity, Equity, and Inclusion Compliance, Employment Law, Governmental Affairs, Leaves of Absence, and Workforce Analytics and Compliance blogs.

This article and more information on how the Trump administration’s actions impact employers can be found on Ogletree Deakins’ Administration Resource Hub.

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Quick Hits

• The U.S. Department of Education’s updated IPEDS data collection proposal clarifies that ACTS would only apply to selective four-year institutions.
• Institutions that both admit 100 percent of applicants and award no non-need-based aid in a given collection year would be exempt from the data collection for that year.
• The Education Department underscores the ACT’s purpose to identify race-based preferencing in admissions and non-need-based aid practices, signaling potential risk-based Title VI of the Civil Rights Act of 1964 scrutiny.
• Public comments are due December 15, 2025.

The Education Department’s notice proposes that ACTS would apply to four-year selective institutions and explicitly exempt otherwise eligible institutions that both admit 100 percent of applicants and do not award non‑need‑based aid for a given collection year. The changes stem from the public response to the Education Department’s Direct Questions in the prior sixty-day notice associated with the ACTS supplement, issued in August 2025. Comments on that proposal closed October 14, 2025.

The Education Department reiterated that ACTS is intended to collect information indicating whether institutions “are using race‑based preferencing in admissions,” citing the August 7, 2025, presidential memorandum directing expansion of required IPEDS reporting and the Education Department secretary’s same‑day directive to initiate changes in the 2025–26 school year.

Selective institutions—and competitive graduate and professional programs within broader institutions—should anticipate heightened transparency expectations around admissions and scholarship practices, potential risk‑based Title VI of the Civil Rights Act of 1964 reviews tied to the proposed data requirements, and closer scrutiny of non‑need‑based aid. The Education Department’s rationale references recent directives, including the August 7, 2025, presidential memorandum and the secretary’s same‑day directive to initiate changes in the 2025–26 school year, reinforcing the enforcement‑oriented posture of the proposal.

Next Steps

Selective four-year institutions should anticipate continued emphasis on admissions and scholarship transparency, potential risk‑based Title VI reviews anchored in the proposed new data requirements, and closer scrutiny of non‑need‑based aid practices. Institutions that have mapped data availability, implemented privacy controls, clarified program-level selectivity, and conducted privileged review of admissions and aid data across the reporting periods will be better prepared to adjust to whatever ACTS ultimately requires and to withstand heightened Education Department scrutiny of admissions and scholarship practices.

Ogletree Deakins’ Diversity, Equity, and Inclusion Compliance, Government Contracting and Reporting, Higher Education, and Workforce Analytics and Compliance practice groups will continue to monitor developments and will provide updates on the Diversity, Equity, and Inclusion Compliance, Employment Law, Government Contracting and Reporting, Higher Education, and Workforce Analytics and Compliance blogs as additional information becomes available.

This article and more information on how the Trump administration’s actions impact employers can be found on Ogletree Deakins’ Administration Resource Hub.

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