The legal landscape for employers is shifting quickly, and recent developments show that compliance cannot be an afterthought. The Equal Employment Opportunity Commission (“EEOC”) is sharpening its approach to religious accommodation requests and clarifying its stance on transgender protections under Title VII. At the same time, Congress’s Big Beautiful Bill (“BBB”), enacted on July 4, 2025, reshapes wage-and-hour law through new tax treatment of tips and overtime, and expanded credits for Paid Family and Medical Leave (“PFML”). Together, these changes require employers to move now on policies, training, and payroll systems if they want to reduce risk and stay ahead of enforcement trends.
Religious Accommodations
Religious accommodations are a key area of focus. For years, many employers used a “more than minimal” burden standard when deciding whether to grant a religious accommodation. The Supreme Court’s decision in Groff v. DeJoy raised that bar by requiring employers to show a substantial burden before refusing a request.
On August 4, 2025, the EEOC issued two decisions that apply Groff in a demanding manner and highlight the agency’s emphasis on documentation and the interactive process. In Augustine V. v. Department of Veterans Affairs, an employee requested an adjusted schedule to leave early every Friday for Sabbath observance and offered to make up the hours earlier in the week. The VA rejected her proposal and told her to either convert to part-time or work Saturdays. The EEOC held that these options were not reasonable because they forced the employee to accept significantly less favorable terms just to practice her faith. The agency ordered back pay with interest, potential compensatory damages and fees, management training, and a workplace posting acknowledging the violation, underscoring that employers must seriously consider the employee’s suggested accommodation before insisting on more burdensome alternatives.
In Andy B. v. Federal Reserve Board, a law enforcement officer requested a religious exemption from the Board’s COVID-19 vaccination policy, citing Christian beliefs that prevented him from taking a vaccine linked to fetal cell lines. The Board delayed, denied the request without offering meaningful alternatives, and then terminated the officer for noncompliance.
Applying Groff retroactively, the EEOC focused on what was missing from the record. The employer could not show that it evaluated undue hardship, considered alternative accommodations, or engaged in an honest interactive discussion. As a result, the officer’s remedies extended far beyond a simple policy tweak. They included reinstatement, back pay dating back to the 2022 termination, removal of termination records, required training and postings, and potential discipline for supervisors involved.
These decisions send a clear message: treat religious accommodations with the same rigor as ADA accommodations. Engage promptly, ask clarifying questions, consider the employee’s requested solution first, explore reasonable alternatives if you cannot grant it, and document every step, from the discussion and options considered to operational impacts and the reasons for any denial.
Transgender Protections
Transgender protections remain another critical compliance area. Since Bostock v. Clayton County in 2020, Title VII has prohibited discrimination based on sexual orientation and gender identity. Political messaging and enforcement priorities may change, but Bostock remains binding Supreme Court precedent. In 2025, reports suggested a temporary deprioritization of transgender claims. As a result, litigation has emerged over how agencies handle these complaints, including signals that they administratively close certain disparate-impact-only charges while issuing right-to-sue notices.
What Employers Should Do
Employers cannot assume that shifting enforcement emphasis removes their exposure. Private lawsuits and internal complaints continue to pose a substantial risk if policies or practices fall behind the current state of the law. Employers should assume Bostock governs and plan accordingly by keeping written policies explicit about gender identity and sexual orientation protections, updating complaint procedures, and training managers and HR professionals on practical issues such as names, pronouns, dress codes, facility access, and benefits questions. Regular self-audits of pay, promotion, discipline, and termination outcomes can help identify potential disparate impact and allow employers to correct patterns before they become legal disputes.
No Tax on Tips
At the same time, the BBB rewrites key wage-and-hour rules in ways that affect day-to-day payroll operations. The law creates a federal income tax deduction for voluntary tips, including tips received through valid tip-sharing arrangements, while excluding automatic service charges, which remain non-tip compensation. Employees must still report all tips as income and then claim a deduction on their returns. The deduction is subject to a monetary cap and phases out at higher income levels, which means employers need to communicate carefully with employees about who is most likely to benefit. Employers should reinforce accurate tip reporting procedures, audit existing tip-pooling practices for Fair Labor Standards Act compliance, and ensure that payroll systems can track and display tip amounts clearly on pay statements so employees and their tax preparers can distinguish eligible tips from other compensation.
Overtime Pay
The BBB also allows employees to deduct the premium portion of their overtime pay. Because the deduction applies only to the premium portion, employers must track that amount separately from base earnings to support accurate W-2 reporting and employee tax filings. Timekeeping systems must capture overtime hours precisely, and payroll must code the overtime premium distinctly. The law requires employers to show exempt tips and overtime premium amounts in employee records starting in 2025 and to use new W-2 codes beginning with the 2026 tax year. Employers who wait until year-end to re-map codes or redesign pay statements risk reprints, corrections, and confusion.
Family Leave
In addition, the BBB extends employer tax credits for qualifying paid family and medical leave programs. Employers can calculate the credit based on wages paid during leave or insurance premiums for qualifying policies, as long as the plan offers at least two weeks of leave paid at 50 percent or more of regular wages. That flexibility allows employers to choose a wages-paid or insured model that fits their workforce, budget, and risk tolerance, particularly for multi-state operations. To capture these credits, employers need to align policy language, payroll calculations, and documentation to substantiate eligibility in the event of an audit.
Takeaways
In light of these developments, employers should act now on several fronts.
- On religious accommodations, adopt an ADA-style interactive process, use standardized intake forms, track discussions and alternatives, and escalate complex cases to HR and legal counsel early.
- On transgender protections, update handbooks and equal employment opportunity policies to explicitly include gender identity and sexual orientation, refresh complaint and investigation procedures, and provide scenario-based training for managers.
- On wage and hour systems, reconfigure payroll to separately code qualified tips and overtime premiums, test how those values flow into year-end reporting, and tighten compliance around tipping, overtime, and PFML credits.
The pace of legal change shows no sign of slowing. Employers that adapt early will be best positioned to reduce disputes, protect employees, and take advantage of available tax credits.
If you have questions about religious accommodations, transgender discrimination compliance, or wage-and-hour changes under the BBB, the attorneys at Hoyer Law Group, PLLC are here to help. Our experienced team advises employers of all sizes on EEOC compliance, Title VII policies and training, tipped-workforce practices, PFML credit strategy, and overtime operations.
