2025’s Turning Point: What HR Leaders Can Learn from the EEOC and the Big Beautiful Bill

EEOC Religious Accommodation Decisions

For decades, employers could deny a religious accommodation if it imposed more than a minimal burden. The U.S. Supreme Court’s 2023 decision in Groff v. DeJoy raised that bar, holding that an employer must show a substantial burden before denying a request. Two August 4, 2025, EEOC decisions show just how aggressively the agency is now applying that standard — even retroactively.
 

Augustine V. v. Department of Veterans Affairs

One of the EEOC’s August decisions involved the Department of Veterans Affairs. The matter centered on an employee who asked to leave early every Friday afternoon for Sabbath prayer. To balance her schedule, she offered to work extra hours Monday through Thursday. Rather than accept her proposal, the agency required her to either convert to part-time status or work on Saturdays.

The EEOC concluded that these alternatives were not reasonable. By forcing the employee into choices that significantly burdened her (fewer hours or weekend work), the VA had effectively denied her request for accommodation.

The agency was ordered to provide back pay with interest, cover potential compensatory damages and attorney’s fees, require management to complete four hours of training, and post a workplace notice stating that it had violated the employee’s religious rights.

Andy B. v. Federal Reserve Board

The second decision arose from the Federal Reserve Board’s COVID-19 vaccination policy. In 2021, a law enforcement officer requested a religious exemption, explaining that his Christian beliefs prevented him from taking a vaccine developed from fetal cell lines. The Board told him to take three weeks to reconsider, but ultimately denied his request without offering any alternatives. When the officer refused to comply, he was terminated.

The EEOC not only found that the Board had mishandled the request, but it also applied the Groff v. DeJoy standard retroactively, even though that decision was issued the following year. The critical issue was documentation: the Board could not produce records showing it had considered the request or weighed whether granting it would cause an undue hardship or engaged in an interactive process – a discussion – with the employee. Without proof the agency considered the request or engaged in the interactive process with the employee, the agency concluded that the denial was unlawful.

The Board was ordered to reinstate the officer, provide back pay dating to his 2022 termination, and remove records of the dismissal from his personnel file. The decision also left open the possibility of compensatory damages and required management training, posting of a violation notice, and even consideration of whether the supervisors involved should face discipline.

Employer Takeaway

Employers should approach religious accommodation requests with the same care they give to disability accommodations under the Americans with Disabilities Act (ADA). That means engaging in the interactive process – specifically a discussion with the employee that is documented - considering the accommodation requested and offering alternative options if the employer is unable to grant the requested accommodation, and clearly explaining when and why a request would create a substantial burden. Without thorough documentation of the interactive process, defenses can quickly unravel.
 

Transgender Rights and EEOC Enforcement

Since the Supreme Court’s 2020 decision in Bostock v. Clayton County, Title VII has protected employees from discrimination based on sexual orientation and gender identity. In April 2025, however, reports suggested the EEOC was deprioritizing transgender cases following a presidential executive order recognizing only two sexes. By July, the Director of Field Operations reversed course, instructing investigators to continue processing claims consistent with Bostock.

Litigation has also followed. FreeState Justice filed a lawsuit challenging the EEOC’s handling of gender identity complaints, including allegations that funding to state agencies was withheld when they investigated such claims. In September, Bloomberg reported that the EEOC planned to administratively close all charges based solely on disparate impact (cases where facially neutral policies have disproportionate effects), with right-to-sue letters to follow.
 

Employer Takeaway

Despite political shifts, Bostock remains the controlling law. The Supreme Court would be required to either recognize the precedent it set under Bostock or overturn it. It is unlikely this would occur. Employers should keep policies updated to prohibit discrimination based on gender identity and sexual orientation, ensure complaint procedures and training reflect these protections, and continue periodic audits of pay, promotion, discipline and termination outcomes for potential disparate impact concerns.
 

Wage Law Updates Under the Big Beautiful Bill

On July 4, 2025, Congress enacted the Big Beautiful Bill, changing how tips and overtime are treated for tax purposes. The new law also extended Paid Family Medical Leave (PFML) credits, which were set to expire in 2025. Employers now face immediate payroll adjustments and new reporting requirements, including draft W-2 changes for 2026.

No Tax on Tips

The new deduction applies only to voluntary tips, including those received through tip-sharing, but not to automatic service charges added to a bill. Employees must continue reporting tips as income and then claim the deduction on their tax returns. The benefit is capped at $25,000 annually, with phase-outs starting at $150,000 in income and disappearing entirely at $400,000. To help clarify eligibility, the Treasury is expected to release a list of qualifying occupations.

No Tax on Overtime

The overtime deduction applies only to the premium portion of pay, or the additional half-time rate for hours worked beyond 40 in a week. It is capped at $12,500 for individuals and $25,000 for joint filers, with the benefit phasing out at higher income levels. To comply, employers will need to track and report overtime separately.
 

Payroll Reporting Changes

Employers will need to add separate line items or attachments to show exempt tips and overtime on employee pay records in 2025. Starting in 2026, the IRS will require new W-2 codes to capture this information, and draft forms reflecting those changes have already been released.

PFML Credits

The BBB also extended tax credits for employers that provide qualifying paid family and medical leave. Employers can calculate the credit based on wages they pay directly or on insurance premiums they cover, as long as the plan offers at least two weeks of leave at no less than 50 percent of the employee’s regular wages.

Employer Takeaway

Employers should begin working with payroll providers and tax advisors now to prepare for these changes. Building systems to track tips and overtime and updating processes for the new W-2 reporting requirements will reduce the risk of compliance issues once filing season begins.
 

What Employers Should Do Now

 

• Religious accommodations: Apply ADA-style interactive processes and document every step. Without documentation, defenses collapse.
   
• Transgender protections: Assume Bostock remains in force. Keep policies, training, and workplace practices aligned with Title VII obligations.
   
• Disparate impact: Even if the EEOC shifts priorities, private lawsuits remain a risk. Self-audits of policies are still essential.
   
• Wage law compliance: Payroll teams must adapt quickly. Track tips and overtime separately and prepare for the 2026 W-2 reporting changes.

The pace of legal change in employment law shows no signs of slowing. Employers that stay proactive, including updating policies, documenting decisions, and coordinating with counsel and payroll, will be best positioned to manage risk and avoid costly disputes.

This post draws from a recent HSB employment law webinar led by shareholder Chris Gantt-Sorenson. Watch the full discussion, including case studies and additional compliance strategies, here. 

For questions or more information on this topic, please contact Chris.