Social-media personalities are increasingly shaping how employees view their rights, their managers, and the workplace itself. Employers should take the trend seriously—but respond carefully.

More employees are turning to TikTok, Instagram, YouTube, LinkedIn, Reddit, and podcasts for advice about dealing with their employers. Self-described workplace experts provide scripts for challenging discipline, requesting accommodations, discussing pay, documenting misconduct, organizing coworkers, and confronting managers.

Some of this advice is helpful. Some is incomplete or simply wrong. It often comes from people who are not attorneys or human resources professionals and who know nothing about the employee’s workplace, performance history, company policies, or state law.

Employees who follow this advice may treat ordinary supervision as “retaliation,” label reasonable performance expectations as evidence of a “toxic workplace,” or assume that anything framed as a workplace complaint is legally protected. That can damage working relationships, disrupt the workplace, and sometimes cost an employee a job. But employers also face risk: an angry or poorly worded complaint may still involve conduct protected by labor, discrimination, wage-and-hour, safety, leave, or whistleblower laws.

Social-media advice does not determine what the law protects. Employers nevertheless need to recognize when an employee’s actions may be protected before responding or imposing discipline.

Two Different “Employee Influencer” Trends

A recent Bloomberg Law report examined companies that deliberately engage employees with social-media followings to create promotional content. Starbucks and Gap were among the companies identified as using employee-driven creator programs. Those arrangements raise questions about compensable working time, expense reimbursement, content ownership, intellectual property, brand control, and what happens to an account or audience after employment ends.

Employers that sponsor this type of content should use written agreements defining the assignment, compensation, permitted use of company names and property, approval requirements, ownership rights, confidentiality obligations, and post-employment rights.

But employers face another development even when they have no creator program at all: independent workplace influencers who speak directly to employees and encourage them to challenge workplace practices. These personalities may influence an employee’s conduct without having any relationship with—or accountability to—the employer.

Their advice can promote unionization, collective challenges to scheduling or pay practices, demands for changes in workplace culture, public criticism of management, formal complaints, accommodation requests, or refusal to follow a directive believed to be unlawful. It may also encourage employees to record conversations, collect documents, recruit coworkers, or frame ordinary workplace disputes in legal terms.

The advice may be reckless. The employee’s resulting conduct may still be legally protected.

Bad Advice Can Still Lead to Protected Activity

One of the most dangerous assumptions a manager can make is that an employee loses legal protection merely because the employee learned what to say from TikTok—or because the influencer who supplied the script is not a lawyer.

The National Labor Relations Act protects many private-sector employees who act together to improve wages, hours, or working conditions, whether or not a union is already present. Protected concerted activity may include discussing pay, circulating a group complaint, asking coworkers to support a workplace change, approaching management on behalf of several employees, communicating with a union, or using social media to initiate or prepare for group action. The National Labor Relations Board expressly recognizes that protected concerted activity can occur online.

Federal and state laws separately prohibit retaliation for many individual acts. Depending on the circumstances, protected conduct may include complaining about discrimination or harassment, requesting a disability or religious accommodation, raising wage-and-hour concerns, reporting safety issues, taking protected leave, participating in an investigation, or contacting a government agency.

An employee does not necessarily need to cite the correct statute, use legal terminology, or ultimately prove the underlying violation. For example, the Equal Employment Opportunity Commission explains that opposition to suspected discrimination may be protected when based on a reasonable belief that the conduct violated equal-employment laws. Likewise, wage, safety, leave, and whistleblower laws may protect complaints that satisfy their particular standards.

This does not mean that every complaint, social-media post, recording, refusal, or confrontation is protected. An employee may still be held accountable for poor performance, insubordination, threats, harassment, disclosure of genuinely confidential information, knowingly false statements, or violations of lawful and consistently enforced workplace rules. Even the NLRB distinguishes concerted workplace activity from purely individual griping and recognizes that some egregiously offensive or deliberately false conduct can lose protection.

The difficulty is that protected and unprotected conduct can appear in the same conversation. An employee might make a protected wage complaint while also speaking disrespectfully to a supervisor. Another might be organizing coworkers while continuing to miss deadlines. A third might raise a discrimination concern immediately after receiving legitimate corrective feedback. The protected activity does not create immunity from ordinary performance standards—but it makes timing, consistency, documentation, and decision-making critically important.

How Influencer Advice Can Destabilize the Workplace

Online workplace content tends to reward certainty, conflict, and dramatic labels. Real employment matters rarely fit into a 60-second video. When employees rely on generalized advice, employers may see:

1. routine coaching reframed as harassment, discrimination, or retaliation;
2. employees encouraged to communicate through accusatory scripts rather than engage in problem-solving;
3. confidential workplace disputes moved onto public platforms;
4. coworkers recruited into complaints before facts have been reviewed;
5. surreptitious recordings made without regard to state law or workplace policy;
6. lawful directives refused based on an influencer’s incorrect legal interpretation;
7. demands based on rights that apply in another state, to another industry, or only to a covered employer;
8. rapid organizing around a genuine workplace concern before management recognizes the issue; and
9. managers reacting defensively to an employee’s tone instead of evaluating the substance and legal character of the complaint.

Some of these situations will justify correction or discipline. Others will expose a real compliance failure. Many will contain elements of both. That is precisely why employers need a disciplined response rather than a reflexive one.

What Employers Should Do Now

1. Train managers to recognize protected activity

Front-line supervisors do not need to become employment lawyers, but they must recognize warning phrases and circumstances. Complaints involving pay, schedules, safety, discrimination, harassment, leave, accommodations, group concerns, or union activity should be escalated before discipline is imposed. The safest instruction is: pause, preserve the facts, and involve human resources.

2. Separate the employee’s message from the employee’s manner

An employee may communicate poorly and still raise a protected concern. Management should identify the underlying issue first, investigate it, and then decide whether any separate conduct violated a lawful policy. Discipline should address the specific misconduct—not the employee’s decision to assert a protected right.

3. Apply rules consistently

If an employer tolerates lateness, disrespectful communication, personal phone use, or unauthorized recordings until an employee complains about wages or discrimination, later enforcement can appear retaliatory. Consistent enforcement before and after protected activity is one of the strongest safeguards against a retaliation claim.

4. Document the legitimate reason for employment decisions

Performance and conduct issues should be documented when they occur, not reconstructed after a complaint is made. Records should identify the applicable expectation, the facts, prior coaching, comparable treatment, and the business reason for the decision. Avoid labels and conclusions that do not explain what actually happened.

5. Review social-media, confidentiality, recording, and solicitation policies

Employers have legitimate interests in protecting patient, client, employee, financial, proprietary, and security information. They may also regulate working time, use of company systems, harassment, threats, and unauthorized representation of the company. Policies should be specific enough to protect those interests without broadly prohibiting employees from discussing wages, working conditions, or other activity protected by law.

Multi-state employers should also account for state laws governing lawful off-duty conduct, political activity, employee monitoring, access to personal accounts, and recording of conversations.

6. Create credible internal reporting channels

Employees are more likely to rely on strangers online when they believe management will not listen. A clear complaint process, prompt acknowledgment, neutral investigation, and meaningful follow-up can surface issues before they become public or adversarial. Employers should also give employees accurate, accessible information about pay practices, leave, accommodations, and complaint procedures.

7. Treat organizing activity as a legal event, not a management betrayal

Employees generally have the right to support a union, discuss unionization, distribute union literature during nonworking time in nonworking areas, and act together concerning workplace conditions, subject to lawful limitations. Surveillance, threats, interrogation, promises of benefits, or selective enforcement of workplace rules can create substantial liability. Any indication of organizing activity should prompt immediate consultation with experienced labor counsel and careful instructions to supervisors.

8. Review the facts before imposing discipline

Before acting against an employee who recently made a complaint, recruited coworkers, posted about work, requested an accommodation, or raised a legal concern, employers should ask:

1. What exactly did the employee say or do?
2. Was the employee speaking for, with, or to coworkers about workplace conditions?
3. Did the employee raise discrimination, pay, safety, leave, accommodation, or another legally protected issue?
4. What policy or performance standard was allegedly violated?
5. Has the same rule been enforced consistently against others?
6. Who made the decision, and what did that person know about the protected activity?
7. Would the same action have been taken if the employee had never complained?

If the answers are unclear, the decision should be paused and reviewed.

The Best Response Is Better Management

Employers cannot control what employees watch after work, and attempting to suppress lawful discussion will usually create more risk than the online content itself. Nor should companies dismiss every employee who uses fashionable legal language as manipulative or misinformed. Sometimes an influencer gives an employee the vocabulary—or simply the confidence—to identify a genuine workplace problem.

The appropriate response is not to debate social-media personalities. It is to maintain lawful policies, accurate time and payroll records, trained supervisors, dependable complaint procedures, consistent performance management, and access to qualified human resources and legal guidance.

Viral workplace advice may be simplistic. An employer’s response cannot be.

Home care is heading into the tightest reimbursement environment in a generation, and that is exactly when this particular mistake gets made. The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, set in motion roughly $911 billion in net Medicaid cuts through 2034 (CBO), froze new provider taxes, and phases the “safe harbor” provider-tax cap down from 6% to 3.5%. Analysts are forecasting reimbursement shortfalls of 3% to 7% for 2026–2027, Medicare home health took a net 1.3% rate cut for 2026, and the 80/20 Access Rule sits in limbo after CMS delayed enforcement. In one 2026 industry survey, 45% of home care leaders said Medicaid changes will have a very large or huge impact on their ability to operate.

When Medicaid managed-care checks run late and margins are already thin, a payroll comes due before the money lands. The tempting move — “we’ll make the tax deposit next week when the reimbursement clears” — is the single most dangerous corner an owner can cut. Here’s why an experienced advisor treats payroll tax deposits as untouchable, even ahead of the landlord.

The money you withhold is not your money

When you run payroll, part of every caregiver’s check never belonged to the agency. The federal income tax you withhold and the employee’s share of Social Security and Medicare (7.65%) are, in the IRS’s words, held in trust for the government. That’s the origin of the term “trust fund taxes.” You are a custodian, not an owner, of those dollars.

This is the distinction that trips people up. Your payroll tax bill has two halves:

• The trust fund portion — withheld income tax plus the employee’s 7.65% FICA share. This is the money at the center of everything below.
• The employer portion — your matching 7.65% FICA and your FUTA. This is your own liability, and it is not subject to the personal penalty described here.

Skipping a deposit doesn’t feel like taking money that isn’t yours — the cash is sitting in the same operating account as everything else. But legally, spending it on rent, vendors, or your own draw is spending the government’s money. [Your Company]’s tax-impound service moves the trust fund dollars out of your operating account the moment payroll runs, so there’s nothing to accidentally spend when a Medicaid check is three weeks late.

The Trust Fund Recovery Penalty: a bill that follows you home

If those withheld taxes don’t reach the IRS, Internal Revenue Code §6672 lets the government pursue the shortfall personally, through the Trust Fund Recovery Penalty (TFRP). This is not a slap-on surcharge — it equals 100% of the unpaid trust fund portion, assessed directly against the individuals behind the business. The corporate veil does not help. Two elements have to be present, and in a struggling business both are easy to satisfy:

1. You’re a “responsible person.” The IRS looks at substance, not job titles — specifically your status, duty, and authority over the money. Courts weigh factors like whether you’re an officer or owner, control the finances, can sign checks, decide which bills get paid, or hire and fire. That net is wide: owners, partners, sole proprietors, controllers, and even a bookkeeper with check-signing authority have all been held responsible. More than one person can be a responsible person for the same quarter.

2. You acted “willfully.” This is the part people misread. Willful here does not require bad intent, fraud, or any desire to cheat the government. It means you knew the taxes were due (or recklessly disregarded an obvious risk) and paid something else instead. The IRS’s own manual is blunt about the classic example: paying employees their net wages when there isn’t enough to cover the withholding is, by itself, a willful failure. So is paying any other creditor ahead of the deposit once you know it’s outstanding.

A few features make the TFRP uniquely unforgiving, and every owner should know them:

• It’s personal and joint-and-several. The IRS can assess the full 100% against several people at once and collect the whole amount from whichever one has assets.
• It survives bankruptcy. Unlike much business debt, a TFRP is generally non-dischargeable in Chapter 7 or Chapter 13. Closing the agency doesn’t erase it.
• There is no reasonable-cause exception. “We fully intended to pay once reimbursement came through” is not a defense to the penalty the way it might be for other IRS penalties.
• It reaches back and stays. The IRS generally has three years from the return’s due date to assess and ten years to collect — and it rarely lets these debts age out.

Note that this is separate from the business-level failure-to-deposit penalty under §6656, which escalates from 2% to 15% the longer a deposit is late. An agency that falls behind can face both: an escalating penalty on the company and a 100% personal penalty on its owners. This is precisely the exposure a reliable deposit process is designed to make impossible — [Your Company] files and remits on the correct monthly or semiweekly EFTPS schedule so a missed deadline never becomes a §6672 file.

Why home care is unusually exposed right now

The TFRP was practically written for the situation OBBBA is creating in home care: real businesses, thin or negative margins, and revenue that arrives on the payer’s timeline rather than the payroll’s. When a state-directed payment slips or a rate drops mid-year, an owner facing a Friday payroll has to choose what gets paid. Choosing caregivers over the IRS is completely understandable — and it is the textbook willful act.

Two specifics worth flagging for agency operators:

• “Catch up next quarter” is reckless disregard. Once you know a deposit was missed, continuing to run payroll and pay other bills without correcting it satisfies willfulness from that day forward. Intent to fix it later does not protect you.
• Board members of nonprofit agencies aren’t automatically safe. A volunteer director serving in a purely honorary role generally isn’t a responsible person — but a board member who is involved in financial decisions, has check-signing authority, and knows the taxes are unpaid can be. Nonprofit home care boards should understand this before a cash crunch, not during one.

An advisor’s blunt version: in a 3–7% shortfall year, the caregivers must be paid and the IRS must be paid, in that combined order — never one without the other. If your cash can’t cover both the net wages and the withholding, that’s a signal to call your lender or restructure, not to dip into the trust fund. [Your Company] can structure payroll so the tax liability is funded at the same moment wages are, removing the temptation entirely.

The outsourcing myth — and the one real exception

Here’s the honest part, because a payroll company that tells you otherwise is selling you something. Outsourcing payroll does not, by itself, transfer your TFRP liability. As the IRS spells out in Notice 784, you remain the responsible party even when a third party handles the deposits; if a provider fails to remit (or worse, absconds with the funds), the IRS still looks to the business owners first. A payroll service reduces your risk of error; it does not erase your legal responsibility.

There is one genuine exception. If your provider is an IRS-certified professional employer organization (CPEO), the CPEO can, by statute, assume liability for the employment taxes on wages it pays under a CPEO contract. That’s a real, meaningful shift — and it’s worth confirming in writing whether any provider you use is CPEO-certified or simply a reporting agent. If liability transfer matters to you, ask [Your Company] directly about our certification status and what our agreement does and doesn’t assume — a straight answer is the least you should expect.

Already behind? Move deliberately, not reactively

If deposits have slipped, the worst option is to do nothing and hope the next Medicaid batch fixes it. A few advisor-level moves:

• Designate payments to the trust fund portion. If the business still has any cash, voluntary payments can be specifically designated to the trust fund piece of particular quarters, which is the portion that becomes personal. This can shrink or eliminate individual exposure. (The IRS won’t apply payments this way on its own — you have to designate.)
• Respond to Letter 1153 on time. That letter proposes the TFRP against you and generally starts a 60-day clock to file a written protest with IRS Appeals. Appeals frequently resolves cases a revenue officer won’t. Missing the window forfeits your best, cheapest shot at challenging responsibility or willfulness.
• Fix the going-forward process first. The fastest way to make an old delinquency worse is to keep generating new ones. Get current-quarter deposits automated and reliable before anything else. This is the least glamorous thing [Your Company] does and the one that keeps owners out of a §6672 interview.
• Get qualified representation. These cases turn on documented facts about who controlled the money and who knew what, when. A tax controversy professional (CPA, EA, or tax attorney) is worth it once a Letter 1153 is on the table.

Protect yourself before the squeeze hits

• Treat withheld income tax and the employee 7.65% FICA share as untouchable — segregate or impound it every pay run.
• Confirm your EFTPS deposit schedule (monthly vs. semiweekly) and never let a payroll go out without the matching deposit funded.
• Know who in your organization is a “responsible person,” and make sure they understand personal exposure.
• If you outsource, get in writing whether your provider is a CPEO (assumes liability) or a reporting agent (does not).
• Build a cash buffer or credit line sized to cover at least one full payroll including withholding, so a late payer never forces the choice.

The reimbursement pressure of 2026 is real and largely outside any single agency’s control. Whether a late Medicaid check becomes a cash-flow headache or a decade-long personal tax liability, however, is entirely within it. If you’d rather that decision be made automatically — trust fund dollars set aside and deposited on time, every time — that’s the conversation [Your Company] exists to have.

This article is for general information and is not tax, legal, or accounting advice. If your agency is behind on payroll tax deposits or has received IRS correspondence, consult a qualified tax professional about your specific facts before taking action.

Sources

IRS guidance — Trust Fund Recovery Penalty (§6672):

• IRS, Employment Taxes and the Trust Fund Recovery Penalty (TFRP) (responsibility, willfulness, Notice 784, outsourcing): https://www.irs.gov/businesses/small-businesses-self-employed/employment-taxes-and-the-trust-fund-recovery-penalty-tfrp
• IRS, Trust Fund Recovery Penalty (personal liability overview): https://www.irs.gov/individuals/international-taxpayers/trust-fund-recovery-penalty
• IRS, Internal Revenue Manual 5.17.7, Liability of Third Parties for Unpaid Employment Taxes (trust fund portion; responsible-person and willfulness standards; nonprofit board members): https://www.irs.gov/irm/part5/irm_05-017-007
• IRS, Internal Revenue Manual 8.25.1, TFRP Overview and Authority: https://www.irs.gov/irm/part8/irm_08-025-001
• IRS, Outsourcing Payroll and Third-Party Payers / CPEO information (via Publication 926 and IRS.gov/OutsourcingPayrollDuties): https://www.irs.gov/publications/p926

Current home care funding context:

• McKnight’s Home Care, Home care providers under pressure: Navigating Medicaid and Medicare risks (OBBBA cuts, provider-tax phase-down, 80/20 delay, reimbursement shortfalls): https://www.mcknightshomecare.com/home-care-providers-under-pressure-navigating-medicaid-and-medicare-risks/
• AxisCare, The Impact of the One Big Beautiful Bill on Medicaid (CBO cut estimates; 2026 leader survey): https://axiscare.com/blog/the-impact-of-the-one-big-beautiful-bill-on-medicaid/
• Home Health Care News, “Death by 1,000 Cuts”: How Home-Based Care Leaders Navigate Reimbursement Pressure: https://homehealthcarenews.com/2026/05/death-by-1000-cuts-how-home-based-care-leaders-navigate-reimbursement-pressure/
• Healthcare Finance News, Home health agencies get a 1.3% payment decrease for 2026: https://www.healthcarefinancenews.com/news/home-health-agencies-get-13-payment-decrease-2026

Home care sits at an awkward intersection of the tax code. You’re running a business with W-2 caregivers, but you’re also operating under domestic-service labor rules that were written for a very different era — and both sets of rules moved this year. If you process payroll for caregivers, 2026 brings new dollar thresholds, a still-unsettled overtime picture, and a brand-new reporting obligation that lands squarely on your W-2s. Here’s what an experienced advisor would flag.

1. The 2026 numbers your payroll needs to be running

Three federal figures reset for 2026, and getting any of them wrong compounds across every paycheck:

• Social Security wage base: $184,500 (up from $176,100 in 2025). The rate is unchanged at 6.2% each for employer and employee. Most caregivers earn well under the cap, so in practice you’ll withhold 6.2% on essentially all their wages.
• Medicare: 1.45% each, no wage ceiling. An Additional Medicare Tax of 0.9% kicks in on an employee’s wages above $200,000 in a year — employee-only, no employer match. Rare in home care, but your system still has to catch it if a caregiver holds multiple roles at your agency.
• FUTA: 6.0% on the first $7,000 of each employee’s wages, reduced to an effective 0.6% once you claim the full 5.4% state credit. That credit shrinks in a handful of “credit reduction” states, so the effective rate isn’t universal.

For agencies, the combined employer-side FICA of 7.65% plus FUTA is a real line item on thin home care margins. The advisor’s point: these are per-employee, per-year mechanics, and high-turnover workforces multiply the number of times each threshold has to be tracked correctly. This is precisely the arithmetic [Your Company] automates so a caregiver who works three weeks in January and returns in September doesn’t quietly reset a wage base you thought was settled.

2. The overtime question every agency is asking — and why the answer is “it’s complicated”

This is the big one for 2026, and it’s easy to get dangerously wrong.

Background: from 1975 to 2013, third-party home care agencies could treat companionship and live-in caregivers as exempt from federal minimum wage and overtime. A 2013 DOL rule (enforced from 2015) took that exemption away from agency employers — meaning most caregivers became entitled to time-and-a-half.

In 2025, the pendulum started swinging back. On July 2, 2025, DOL proposed a rule to restore the companionship and live-in exemptions for third-party agencies. On July 25, 2025, DOL issued Field Assistance Bulletin 2025-4, telling its own investigators to stop enforcing the 2013 rule.

Here’s where agencies get into trouble. A non-enforcement bulletin is not a change in the law:

• The 2013 rule is still the law. No final rule has been issued. DOL has simply chosen not to enforce it for now.
• The bulletin does not touch private lawsuits. Caregivers and plaintiffs’ attorneys can still sue for unpaid overtime under the 2013 rule, and that’s historically where most home care wage claims originate.
• Courts are still enforcing it. In April 2026, the Sixth Circuit upheld the 2013 rule as valid in DOL v. Americare — even after the Supreme Court’s 2024 Loper Bright decision — finding DOL had express authority to define these exemptions.
• State law runs on its own track. New York, New Jersey, California and others require overtime regardless of the federal posture. An agency that stops paying overtime based on the federal bulletin can be fully compliant with DOL and still be exposed under state wage law.

The advisor’s read: do not change your overtime practices based on the non-enforcement bulletin alone. The prudent move is a state-by-state analysis with employment counsel before touching a single pay rule, and payroll configured to keep paying overtime where the law — federal or state — still requires it. [Your Company] configures overtime rules at the state level and preserves the timekeeping records that survive an audit or a plaintiff’s discovery request, so you’re not betting the agency on a bulletin that could be reversed.

3. “No tax on overtime” — what it actually does (and the new job it hands your W-2 team)

The One Big Beautiful Bill Act (OBBBA, signed July 2025) created a temporary deduction employees hear about as “no tax on overtime.” For a workforce that logs a lot of overtime hours, caregivers will ask about it. Here’s the accurate version:

• It’s an income-tax deduction of up to $12,500 ($25,000 for joint filers), available for tax years 2025 through 2028, phasing out above $150,000 MAGI ($300,000 joint).
• Only the premium portion counts — the extra “half” of time-and-a-half required by the FLSA, not the full overtime paycheck.
• Critically for payroll: overtime is still fully subject to Social Security and Medicare tax. Nothing about your FICA withholding or employer match changes. “No tax” refers only to a slice of the worker’s income tax, claimed on their return.

The part that lands on you: reporting. For tax year 2025, the IRS granted transition relief (Notice 2025-69) — separate W-2 reporting was optional, but you still had to give employees a reasonable approximation of their qualified overtime (often in Box 14 or a year-end statement). Starting with tax year 2026, separate reporting is mandatory, the W-2 is being updated, and there’s a revised 2026 Form W-4 with a worksheet for employees expecting overtime or tips. Your payroll system has to isolate the qualifying overtime premium from regular wages all year long — you can’t reconstruct it in January.

The advisor’s point: this is a tracking problem disguised as a tax break. Agencies still capturing overtime as one lump sum need their systems reconfigured now for the 2026 mandate. [Your Company] already separates qualified overtime at the paycheck level and populates the new W-2 fields automatically — turning a compliance headache into a checkbox.

4. The misclassification trap: caregivers are almost never independent contractors

The single most expensive payroll mistake in home care is issuing a 1099 to a caregiver who is legally an employee. When you control what work is done and how it’s done — schedules, tasks, methods — the worker is your employee, full stop, regardless of what any agreement says.

Get it wrong and the bill is brutal: back Social Security and Medicare (often both halves, because the IRS generally won’t let you retroactively collect the employee’s share), back FUTA, and penalties on top. It also cascades into workers’ comp and state unemployment exposure. In an industry the DOL has historically targeted for enforcement, misclassification is low-hanging fruit for an auditor.

The advisor’s point: “1099 to save on payroll tax” is not a strategy — it’s a deferred liability with interest. Running caregivers as proper W-2 employees through [Your Company] closes the exposure and produces the clean records that make an audit boring.

5. Don’t forget the household-employer segment (Schedule H)

Part of the home care market isn’t agencies at all — it’s families hiring a caregiver directly, and consumer-directed / self-directed Medicaid programs where the client (or a fiscal intermediary) is the employer. Different rules apply:

• The household-employee FICA threshold is $3,000 in cash wages for 2026 (up from $2,800). Cross it and Social Security and Medicare become mandatory on all of that employee’s cash wages for the year — not just the amount above $3,000.
• The FUTA trigger is separate: $1,000 in total cash wages to household employees in any single calendar quarter. The classic error is filing a Schedule H with the FICA columns filled in and the FUTA column blank because the family only heard about the first number.
• Household employers file Schedule H with their personal Form 1040 (no quarterly 941s), and generally pre-pay via estimated taxes or extra withholding to avoid an underpayment penalty.

The advisor’s point: families and self-directed clients rarely realize they’ve become employers until they’ve already crossed a threshold. [Your Company] handles household-employer registration, W-2s, and Schedule H worksheets so a family caring for an aging parent isn’t blindsided at tax time — a natural add-on service for agencies that also support consumer-directed clients.

The 2026 home care payroll checklist

• Update your Social Security wage base to $184,500 and confirm FUTA credit-reduction status for your states.
• Keep paying overtime unless and until counsel confirms a specific federal and state basis not to — the 2013 rule and state laws remain live.
• Reconfigure payroll to isolate qualified overtime premiums and populate the new 2026 W-2 fields; roll out the revised 2026 W-4.
• Audit every 1099 caregiver against the control test — reclassify before an auditor does.
• For direct-hire and self-directed clients, track the $3,000 FICA and $1,000-per-quarter FUTA thresholds independently.

None of this is optional, and most of it is invisible until it’s a penalty notice. If you’d rather your team spend its hours on care instead of on wage bases and Schedule H, that’s the conversation [Your Company] is built for.

This article is for general information and is not tax, legal, or accounting advice. Home care wage-and-hour rules are unsettled at the federal level and vary significantly by state; consult qualified employment counsel and a tax professional for your specific situation.

Sources

• IRS, Publication 926, Household Employer’s Tax Guide (2026) — thresholds, rates, wage base: https://www.irs.gov/publications/p926
• IRS, Topic No. 756, Employment Taxes for Household Employees: https://www.irs.gov/taxtopics/tc756
• U.S. DOL, Fact Sheet #25, Home Health Care and the Companionship Services Exemption: https://www.dol.gov/agencies/whd/fact-sheets/25-flsa-home-healthcare
• U.S. DOL, Direct Care Worker / Domestic Service Final Rule FAQs: https://www.dol.gov/agencies/whd/direct-care/faq
• IRS, One, Big, Beautiful Bill Act — Deductions for Working Americans (overtime/tips deduction, reporting): https://www.irs.gov/newsroom/one-big-beautiful-bill-act-tax-deductions-for-working-americans-and-seniors
• IRS, FAQs on the qualified overtime deduction (Fact Sheet 2026-01): https://www.irs.gov/newsroom/treasury-irs-issue-faqs-to-address-the-new-deduction-for-qualified-overtime-compensation-under-the-one-big-beautiful-bill

DOL Field Assistance Bulletin 2025-4 (July 25, 2025) and the Sixth Circuit’s April 2026 decision in DOL v. Americare Healthcare Services are the primary references for the companionship-exemption enforcement status described in Section 2.

The recent news about Lyft paying $19.4 million to the State of New Jersey is a sharp reminder for all employers: worker misclassification is not just a paperwork error—it’s a legal and financial disaster waiting to happen.

The takeaway for every business owner is simple:

• Audit your workforce classifications now.
• Ensure your payroll setup and HR systems align with wage and hour laws.
• Work with experts who understand compliance—not just software.

At Forework, we combine payroll technology with deep labor law expertise to help employers prevent costly mistakes like this one. Our system is designed to ensure that every worker is properly classified, every contribution is accurately calculated, and every employer is protected from the kind of legal exposure that caught Lyft off guard.

What Happened

After drivers for Lyft filed for unemployment and disability benefits, the New Jersey Department of Labor and Workforce Development (NJDOL) audited the company’s records from 2014 to 2017. The audit revealed that Lyft had misclassified over 100,000 drivers as independent contractors instead of employees. That decision cost the company over $10.8 million in unpaid contributions, plus another $8.6 million in penalties and interest.

Even after contesting the audit in front of the Office of Administrative Law, Lyft ultimately withdrew its challenge and paid the full amount owed—nearly $20 million in total.

Why Misclassification Matters

When a business classifies workers as independent contractors rather than employees, those workers lose access to critical protections, including:

• Minimum wage and overtime pay
• Paid sick and family leave
• Unemployment insurance
• Workers’ compensation benefits

These are not optional benefits—they’re legal obligations for employees. Misclassification undermines workers’ rights and disadvantages compliant employers who play by the rules and contribute to the state’s unemployment insurance trust funds.

The State Is Watching

New Jersey’s Attorney General has made it clear: the state is serious about enforcing worker classification laws. Companies that fail to comply risk more than just audits—they face steep financial penalties, reputational damage, and public scrutiny.

Compliance isn’t optional—it’s a competitive advantage. Let Forework help you stay ahead of the curve.agency’s procedures before relying on any claim. Consult a qualified advisor regarding your specific circumstances.

The National Labor Relations Board (NLRB) has signaled a significant shift in its approach to non-compete agreements.  On June 26, 2026, the NLRB’s Division of Advice issued a memorandum recommending dismissal of charges challenging several restrictive covenant provisions, including a six-month non-compete agreement signed by former employees who later joined a competitor.  Most notably, the Division stated that the current NLRB General Counsel believes non-compete agreements generally do not interfere with employees’ rights under Section 7 of the National Labor Relations Act (NLRA).  While the memorandum is not binding law, it provides the clearest indication yet that the current NLRB is moving away from the aggressive enforcement position taken in recent years.

At Forework, we review the need for restrictive covenants for each client, confirming whether the covenant is necessary (for business reasons), legal, and enforceable.  If appropriate, we prepare properly crafted restrictive covenants that protect the Company’s bottom line!  That’s just one more way that Forework does it differently!  We don’t just process your payroll and new hires; we protect your business through strategic and smart HR technology, documents, and procedures.  

A Significant Change from Prior NLRB Leadership

The memorandum represents a marked departure from the position advanced by former NLRB General Counsel Jennifer Abruzzo.

In 2023, Abruzzo argued that broad non-compete agreements unlawfully restricted employees’ Section 7 rights because they could discourage workers from seeking alternative employment or engaging in protected concerted activity.

Although that position generated considerable attention, the NLRB itself never formally adopted it in a precedential decision.

In 2025, Acting General Counsel William Cowen withdrew several of Abruzzo’s guidance memoranda. This latest Advice Memorandum further confirms that current NLRB prosecutors are unlikely to pursue challenges to non-compete agreements based solely on that theory.

The Case Before the NLRB

The matter involved two former employees who resigned and accepted employment with a competitor after signing agreements containing:

• A six-month non-compete provision;
• Confidentiality obligations;
• Non-solicitation restrictions; and
• A non-disparagement clause.

After reviewing the case, the Division of Advice recommended dismissal of the unfair labor practice charges.

Key Takeaways from the Memorandum

Non-Compete Agreements Are Generally Permissible Under the NLRA

The Division concluded that non-compete agreements, standing alone, generally do not interfere with employees’ Section 7 rights under the National Labor Relations Act.

This represents a substantial shift in enforcement policy and provides employers with greater confidence that reasonable non-compete agreements are less likely to face federal labor law challenges.

Properly Drafted Confidentiality Provisions Remain Defensible

The memorandum also found the employer’s confidentiality provision to be lawful.

According to the Division, employees would reasonably understand the provision as prohibiting disclosure of confidential business information to competitors—not preventing employees from discussing wages, working conditions, or other protected workplace issues.

This distinction remains important when drafting confidentiality agreements.

Enforcement Matters

Although the Division suggested that portions of the employer’s non-disparagement language could potentially raise concerns, it nevertheless recommended dismissal because the employer had never attempted to enforce those provisions against the employees.

The memorandum serves as a reminder that how an employer enforces restrictive covenants can be just as important as the language itself.

State Court Enforcement Was Not Considered Retaliation

The employees also argued that the employer’s state-court litigation and arbitration constituted unlawful retaliation.

The Division rejected that argument, concluding that pursuing enforcement of agreements that remain lawful under current Board precedent does not, by itself, violate the NLRA.

Practical Considerations

Employers should consider the following best practices:

• Review restrictive covenant agreements as a whole. Non-compete provisions may receive less scrutiny under the current NLRB, but confidentiality, non-solicitation, non-disparagement, and other post-employment restrictions can still create legal risk if drafted too broadly.
• Be thoughtful about enforcement. Courts and administrative agencies often evaluate not only what an agreement says, but how an employer applies it in practice.
• Monitor state law developments. Many states continue to restrict or prohibit non-compete agreements through legislation or judicial decisions. Even if federal labor law presents fewer obstacles, employers must still comply with applicable state laws governing restrictive covenants.
• Remember that agency priorities can change. This memorandum reflects the current General Counsel’s enforcement position—not binding NLRB precedent. A future Board or General Counsel could adopt a different approach.

Forework Compliance Tip

Restrictive covenant agreements remain an important tool for protecting confidential information, customer relationships, and business goodwill. However, they should never be treated as “one-size-fits-all” documents. Employers should periodically review their non-compete, confidentiality, non-solicitation, and non-disparagement provisions to ensure they remain enforceable under both federal and state law. 

Forework helps businesses take a more strategic approach to HR compliance, workplace protections, and the policies that support long-term growth.

Many state Paid Family and Medical Leave (PFML) programs update their benefit calculations each year based on changes to the state’s average weekly wage (SAWW). As a result, employers with multi-state workforces should expect annual and sometimes mid-year changes to benefit levels, payroll calculations, and employee communications.  Several states have now announced updated benefit amounts that became effective during the summer of 2026, while others have scheduled increases later this year.

Paid Family and Medical Leave laws continue to expand nationwide, and each state has its own eligibility rules, benefit formulas, notice requirements, and payroll obligations. Employers with multi-state workforces should review their leave policies annually and verify that payroll systems are applying the correct state-specific rules.

Forework helps employers stay ahead of changing leave laws by combining payroll technology with employment law expertise making it easier to administer complex leave programs while reducing compliance risk.

Here’s a summary of the latest changes.

Colorado (FAMLI)

Effective July 1, 2026, Colorado increased both its State Average Weekly Wage (SAWW) and maximum weekly benefit under the Family and Medical Leave Insurance (FAMLI) program.

• State Average Weekly Wage: Increased from $1,534.94 to $1,608.91
• Maximum Weekly Benefit: Increased from $1,381.45 to $1,448.02

District of Columbia

The new benefit amount has not yet been announced but will reflect the District’s increase in the minimum wage to $18.40 per hour, effective July 1, 2026.

The District’s Paid Family Leave program is expected to increase its maximum weekly benefit beginning October 1, 2026.

The current maximum weekly benefit remains $1,190 until the updated amount is published.

Maine

Maine’s Paid Family & Medical Leave program also implemented increases effective July 1, 2026.

• State Average Weekly Wage: Increased from $1,198.84 to $1,249.12
• Maximum Weekly Benefit: Increased to $1,249.12

These updated benefit amounts apply to new claims beginning on or after July 1, 2026.

Oregon

Paid Leave Oregon updated its benefit calculations effective June 28, 2026.

• State Average Weekly Wage: Increased from $1,363.80 to $1,410.13
• Maximum Weekly Benefit: Increased from $1,636.56 to $1,692.16

The new benefit levels apply to new claims filed on or after June 28, 2026.

Rhode Island

Rhode Island increased benefits under its Temporary Disability Insurance (TDI) and Temporary Caregiver Insurance (TCI) programs effective July 1, 2026.

• State Average Weekly Wage: Increased from $1,297.06 to $1,352.74
• Maximum Weekly Benefit: Increased from $1,103 to $1,150
• Maximum Benefit with Dependency Allowances: Increased from $1,489 to $1,552

These updated amounts apply to new claims beginning on or after July 1, 2026.

`Washington

Washington’s Paid Family & Medical Leave program also announced updated benefit calculations.  Effective July 1, 2026:

• State Average Weekly Wage: Increased from $1,830 to $1,919

Beginning January 1, 2027:

• Maximum Weekly Benefit: Will increase from $1,647 to $1,727

What Employers Should Do

While these updates generally affect benefit calculations rather than employer contribution rates, employers should ensure they are prepared for the changes by:

• Updating employee leave information and internal guidance where necessary;
• Confirming payroll and leave administration systems reflect the new benefit calculations;
• Coordinating with payroll providers and leave administrators to ensure compliance; and
• Monitoring additional state announcements, as several jurisdictions continue to expand or modify their Paid Family and Medical Leave programs.

For employers operating in multiple states, staying current on annual PFML updates is essential. Benefit amounts, contribution rates, eligibility requirements, and reporting obligations continue to evolve, making regular compliance reviews an important part of payroll and HR administration.

Forework combines payroll technology with employment law expertise to help employers manage these evolving requirements more proactively. As leave laws continue to change across the country, Forework helps businesses keep their payroll and HR processes aligned with the requirements affecting their workforce.

The U.S. Department of Labor’s Wage and Hour Division recently released four new Opinion Letters interpreting the Fair Labor Standards Act (FLSA). While opinion letters are not binding law, they provide valuable insight into how the DOL is likely to interpret and enforce federal wage and hour requirements.  For employers—particularly those in healthcare, home care, and other industries with complex scheduling—these letters offer practical guidance on several common compliance issues. 

These opinion letters reinforce a broader trend: the Department of Labor continues to focus on accurate timekeeping, proper overtime calculations, and careful classification of employees.

Employers should periodically review:

• Exempt employee classifications
• Bonus and incentive compensation plans
• Meal period policies
• Timekeeping and rounding practices
• Off-the-clock work procedures

These are also areas where payroll, timekeeping, HR, and legal compliance need to work together. Forework is designed around that connection, helping employers maintain more consistent processes as wage-and-hour requirements evolve.

A proactive compliance review today may help avoid costly wage-and-hour litigation tomorrow.

Below is a summary of the key takeaways.

1. Exempt Employees Can Perform Non-Exempt Work—If Structured Properly

One of the most significant opinion letters addresses a question many healthcare employers face: Can a salaried exempt employee pick up hourly shifts without losing exempt status?  The DOL’s answer is yes, provided several important conditions remain true.

In the opinion letter, a hospital employed a Nursing Professional Development Specialist as an exempt employee. On weekends, she voluntarily worked bedside nursing shifts that were paid on an hourly basis. Although those shifts occasionally represented more than one-third of her weekly hours, the DOL concluded that she remained exempt because:

• Her primary duty continued to be exempt professional work;
• She continued to receive her guaranteed salary each week; and
• The additional hourly compensation was structured as permissible extra compensation under the FLSA.

Employers may compensate exempt employees separately for additional non-exempt assignments without automatically jeopardizing the exemption.  However, employers should periodically evaluate whether:

• the employee’s primary duties remain exempt;
• the guaranteed salary is always paid regardless of hours worked; and
• the non-exempt work has become so substantial that the employee’s primary role has effectively changed.

If the employee’s primary duty shifts toward non-exempt work, overtime obligations may apply to all hours worked.

2. Certain Quarterly Bonus Structures Eliminate Overtime Recalculations

Many employers struggle with calculating overtime when nondiscretionary bonuses are paid after the work has already been performed. Normally, a nondiscretionary bonus must be added into the employee’s regular rate of pay, requiring employers to perform a retroactive overtime calculation. The DOL explained that this additional calculation is not required if the bonus is designed as a valid “percentage of total earnings” bonus under 29 C.F.R. § 778.210.

In the opinion letter, employees shared a quarterly bonus pool based upon each employee’s percentage of the total wages earned by all eligible employees. Because overtime earnings were already included in that formula, the bonus automatically increased both straight-time and overtime earnings proportionately. As a result, no additional overtime calculation was necessary.

Thus, employers may be able to significantly simplify overtime administration by carefully structuring bonus plans.  To qualify, the formula must:

• be based on total earnings;
• include overtime earnings;
• exclude payments not included in the regular rate (such as discretionary bonuses or expense reimbursements); and
• be applied consistently.

Improperly designed bonus plans may still require retroactive overtime adjustments.

3. Off-Site Meal Break Travel Is Generally Not Compensable

Another opinion letter addresses a common employee complaint involving lengthy security procedures during meal periods.  An employee argued that walking to the parking lot and passing through security checkpoints consumed much of the employer’s unpaid 30-minute meal period, leaving little time to actually eat.  The DOL disagreed.

Under the FLSA, the relevant question is not how much time an employee actually spends eating.  Instead, the issue is whether the employee is:

• completely relieved from duty; and
• provided a bona fide meal period.

Because the employer:

• provided an unpaid 30-minute meal period,
• maintained an on-site eating area, and
• did not require employees to leave the premises,

the employee’s decision to drive elsewhere for lunch did not convert that travel time into compensable work time.

Therefore, employers generally are not required to pay employees for time voluntarily spent traveling off-site during unpaid meal breaks.

However, employers should ensure employees are genuinely relieved of all work responsibilities during unpaid meal periods and avoid interrupting employees with work-related duties.

4. The DOL Continues to Scrutinize Off-the-Clock Work and Rounding Policies

The final opinion letter contains perhaps the strongest compliance warning.  The DOL examined hospital employees who routinely performed pre-shift work such as:

• reviewing patient assignments,
• receiving shift handoff reports,
• preparing equipment, and
• getting ready for patient care.

The agency concluded these activities appear to be integral and indispensable to the employees’ principal duties, making the time compensable under the FLSA.  By contrast, simply waiting in line to clock in before any work begins—or waiting after the workday ends to clock out—generally remains non-compensable.

The De Minimis Defense Is Becoming Increasingly Difficult

Historically, employers sometimes relied upon the “de minimis” doctrine to disregard very small amounts of work time.  The DOL cautioned that advances in modern timekeeping technology have significantly weakened that defense. Where employees regularly perform even small amounts of off-the-clock work, employers should expect heightened scrutiny.

Rounding Policies Must Be Truly Neutral

The opinion letter also criticized an employer’s rounding practice that rounded away employees’ early clock-ins.  Although rounding remains permissible under federal law, it must operate neutrally over time.  If employees routinely begin performing work shortly after clocking in early, but the employer’s system consistently rounds that time away, the policy could create minimum wage or overtime violations.

Practical Takeaway

Employers should review whether:

• employees perform any work before scheduled start times;
• supervisors encourage or tolerate pre-shift work;
• rounding practices consistently undercount compensable time; and
• current timekeeping systems accurately capture all hours worked.

Healthcare employers, home care agencies, and employers with shift-change responsibilities should pay particular attention to these issues.

Why Opinion Letters Matter

Although DOL opinion letters are not binding on courts, they provide valuable insight into how the Wage and Hour Division interprets the Fair Labor Standards Act.

They can also provide employers with evidence that they acted in good faith, helping defend against allegations that an FLSA violation was “willful”—a distinction that can significantly affect damages and the applicable statute of limitations.

Need help evaluating your wage-and-hour practices?

Forework combines payroll technology with attorney-designed compliance expertise to help employers identify wage-and-hour risks before they become lawsuits. At the time of set up, we provide a FREE mini audit – conducted by wage and hour attorneys – to ensure that your compensation practices are in compliance.  Ready to make a meaningful change to your company?  

Why the One Big Beautiful Bill Act turns correct worker classification into a payroll advantage — not just a compliance chore

The One Big Beautiful Bill Act (OBBBA, Public Law 119-21, signed July 4, 2025) created a temporary federal deduction — the widely publicized “No Tax on Overtime” — that, for the first time, attaches a concrete tax benefit to being a properly classified, overtime-eligible W-2 employee.

In a workforce defined by long hours and 24-hour shifts, that benefit lands squarely on home care. But it comes with real fine print, a new reporting obligation for agencies, and a genuine risk of over-promising to your caregivers. Here is what the law actually does — and does not — do.

What “No Tax on Overtime” Actually Is (and Isn’t)

Despite the headline, overtime is not tax-free. OBBBA created an above-the-line federal income tax deduction for the premium portion of qualified overtime — the extra “half” of time-and-a-half required by the Fair Labor Standards Act (FLSA). The key parameters:

• Deduction cap: up to $12,500 per year ($25,000 for joint filers).
• Premium only: if a caregiver earns $18/hour regular and $27/hour for overtime, only the $9/hour premium is deductible — not the full overtime wage.
• Above-the-line: available whether the worker itemizes or takes the standard deduction; claimed on the new Schedule 1-A (Form 1040).
• Temporary: tax years 2025 through 2028 only, unless Congress extends it.
• Income phase-out: begins at modified AGI of $150,000 ($300,000 joint), reduced by $100 for every $1,000 above the threshold.
• Still subject to FICA: the deduction reduces federal income tax only. Social Security and Medicare — and generally state income tax — are still owed on every overtime dollar.
• Eligibility limits: a Social Security number valid for work is required, and married-filing-separately taxpayers are excluded.

The deduction belongs to the worker, not the agency. But whether your caregivers can claim a single dollar of it depends entirely on how you classify and pay them — which is exactly where an agency’s payroll decisions come in.

How we can help  The way this deduction interacts with your pay rates, shift differentials, and state overtime rules is not always obvious. We can model the after-tax impact for your caregiving staff and confirm your payroll coding captures the premium correctly.

Why It Lands Hard on Home Care — and Rewards Correct Classification

Home care is one of the most overtime-intensive sectors in the economy. Long shifts, live-in arrangements, and weeks well past 40 hours are routine. That makes the overtime deduction unusually valuable to caregivers — but only when two conditions are met:

1. The caregiver is a W-2 employee, not a 1099 contractor. Independent contractors are not entitled to FLSA overtime, so they have no “qualified overtime compensation” to deduct. A 1099 caregiver gets nothing.
2. The caregiver is actually owed FLSA overtime — and here the ground is shifting. The 2013 Home Care Rule barred third-party employers such as agencies from claiming the FLSA’s “companionship” and live-in exemptions, which is why agency caregivers have generally been overtime-eligible. But in July 2025 the DOL proposed to restore those exemptions for third-party employers and, in Field Assistance Bulletin 2025-4, suspended enforcement of the 2013 rule against agencies. The 2013 rule technically remains on the books and still governs private lawsuits, so for now caregivers who perform substantial hands-on care — more than incidental “companionship” — generally remain non-exempt, and many states require overtime regardless of the federal exemption. In short, whether a given caregiver is owed federal overtime — and can therefore claim the deduction — increasingly turns on state law and the actual duties performed.

The strategic point connects directly to last month’s issue. The 1099 model doesn’t only expose your agency to back taxes and penalties — it now denies your caregivers a tangible, federally sponsored tax break. Proper W-2 classification has quietly become a recruiting and retention argument, not merely a compliance obligation.

A 1099 caregiver working sixty-hour weeks receives no overtime and no overtime deduction. The same caregiver, correctly classified as a non-exempt W-2 employee and owed overtime, receives both. In a tight labor market, that difference is a hiring advantage — one you can put in a job posting.

How we can help  If you’re weighing whether to reclassify contractors — or already planning to — we can pair the reclassification with the payroll setup needed to capture the overtime deduction, so the change becomes a benefit you can advertise rather than a cost you absorb.

The New Reporting Burden Agencies Can’t Ignore

The deduction creates work for employers. To let caregivers claim it, agencies must separately track and report the FLSA overtime premium — not total overtime pay, only the required “and-a-half” half.

• 2025 transition relief: for the 2025 tax year, the IRS is not requiring modified payroll forms and is waiving penalties for employers who don’t separately report qualified overtime, provided a reasonable, documented method is used.
• 2026 onward — mandatory: on the final 2026 Form W-2 (released by the IRS in January 2026), all employers — agencies and household employers alike — must report qualified overtime compensation using the new Box 12, Code TT, beginning with 2026 wages (on W-2s issued in early 2027). Payroll systems must be coded to isolate the FLSA premium so the correct figure lands in that box.
• Withholding: caregivers who want the deduction reflected in take-home pay should file an updated Form W-4. A start-of-2026 withholding review is prudent for both worker and employer.

How we can help  We can audit your payroll coding now — before the 2026 requirements bite — so the FLSA premium is isolated correctly, your W-2s are right the first time, and your caregivers actually receive the benefit you’re telling them about.

A Word of Caution on “No Tax on Tips”

OBBBA’s companion provision — a deduction of up to $25,000 for qualified tips — has generated understandable interest. For most home care agencies it is a limited story. The tips deduction applies only to occupations the Treasury has designated as customarily and regularly tipped as of December 31, 2024. Personal care and home health aides are not traditionally tipped occupations, so most caregivers will not qualify, and gratuities in an agency setting raise their own wage-and-hour questions. Before promoting a “tax-free tips” benefit to staff, confirm eligibility against the published occupation list.

How we can help  We can check your workforce against the Treasury’s tip-eligible occupation list and flag any roles that genuinely qualify, so your communications to caregivers stay accurate.

What OBBBA Means for the Families You Serve

The families who hire caregivers — and the older adults who receive care — have their own set of changes worth flagging:

• The $6,000 senior deduction. For tax years 2025 through 2028, individuals aged 65 or older may claim an additional $6,000 deduction ($12,000 for a couple where both qualify), on top of the existing age-based standard deduction. It phases out above modified AGI of $75,000 ($150,000 joint) and is available whether or not the taxpayer itemizes. For many care recipients on fixed incomes, this is straightforward money.
• Dependent care benefits for adult care. Care for an aging parent or an incapacitated spouse can qualify for the Child and Dependent Care Credit and a dependent care FSA — but only when the care recipient is a “qualifying individual”: a spouse or dependent physically or mentally incapable of self-care. Where the conditions are met, 2026 brings permanently larger benefits: the dependent care FSA cap rises from $5,000 to $7,500, and the maximum credit rate climbs from 35% to 50% of eligible expenses (up to $3,000 for one qualifying individual, $6,000 for two or more).
• Coordination matters. Every dollar run through a dependent care FSA reduces the expenses eligible for the credit dollar-for-dollar. Maxing the FSA can eliminate the credit entirely, so the better choice depends on income, filing status, and the amount of care purchased.

How we can help  If your agency helps families with care coordination, this is a natural value-add. We can review a family’s situation to determine whether the senior deduction, the dependent care credit, or an FSA election produces the best result — and make sure they aren’t misclassifying the caregiver in the process.

Five Steps to Take Now

1. Confirm your caregivers are W-2 employees receiving FLSA overtime. The overtime deduction only reaches correctly classified, overtime-eligible workers. If you’re still running a 1099 model, last month’s issue explains the exposure — this month’s explains what your workers are losing.
2. Isolate the FLSA overtime premium in your payroll system. Total overtime pay is not the reportable figure; only the required “half” premium is. Code for it now.
3. Prepare for mandatory 2026 reporting. Household employers: plan for Box 12, Code TT. Agencies: confirm your payroll vendor will separately report qualified overtime on 2026 W-2s.
4. Prompt a Form W-4 refresh. Caregivers who want the deduction reflected in withholding should update their W-4 for 2026.
5. Advise client families on the senior deduction and dependent care coordination. A brief, accurate conversation can distinguish your agency — and keep families clear of the household-employer traps we covered last month.

The Bottom Line

The “No Tax on Overtime” deduction is modest in size and temporary in duration — but it changes the conversation about worker classification in home care. For years, the case for proper W-2 classification was defensive: avoid audits, back taxes, and penalties. OBBBA adds an offensive case. Correctly classified caregivers now gain a real federal tax benefit that no 1099 arrangement can deliver, while agencies that get their payroll coding and reporting right turn a compliance requirement into a recruiting advantage.

The agencies that move early — clean classification, correct premium tracking, and accurate caregiver communications — will be the ones telling a better story to both their workforce and the families they serve.

Our firm works exclusively with home care and senior living organizations. If you’d like a review of your 2026 payroll coding, help implementing overtime-premium reporting, or guidance for the families you serve on the senior deduction and dependent care benefits, we’re here to help.

Sources: IRS, “One, Big, Beautiful Bill Act: Tax Deductions for Working Americans and Seniors” (2025) • OBBBA / Public Law 119-21 (July 4, 2025) • Treasury & IRS transition-relief guidance on tips and overtime reporting (2025) • IRS Publication 926, Household Employer’s Tax Guide (2026) • U.S. DOL Wage & Hour Division, Home Care Rule (2013) and Field Assistance Bulletin 2025-4 / proposed companionship rulemaking (July 2025) • IRS Publication 503, Child and Dependent Care Expenses • IRC §§ 21 and 129 (dependent care)

This newsletter is for general informational purposes only and does not constitute legal or tax advice. Figures and thresholds reflect guidance available as of June 2026 and may change as the IRS issues further guidance. Consult a qualified advisor regarding your specific circumstances.

Generative artificial intelligence (AI) tools such as ChatGPT, Claude, Gemini, and others are transforming nearly every industry—including employment litigation. While these tools have made legal information more accessible and lowered the barriers for individuals to pursue claims without hiring an attorney, they have also created new challenges for employers defending workplace lawsuits.

Artificial intelligence is changing the way employment disputes begin, but it has not changed the legal standards employers must meet.  Organizations with strong HR practices, compliant payroll processes, accurate timekeeping, and thorough documentation remain in the best position to defend workplace claims whether those claims are drafted by an attorney or generated with AI.

At Forework, we believe the best defense begins long before a claim is filed. Our attorney designed payroll and HR platform helps businesses strengthen compliance processes, improve documentation, and adapt their systems as employment laws and workplace risks evolve.

Today’s pro se (self-represented) litigants are no longer submitting handwritten complaints or informal filings. Instead, many are using AI to generate professionally formatted legal pleadings, motions, discovery requests, and correspondence. Although these documents often contain legal inaccuracies or unsupported arguments, they can substantially increase the time and expense required to defend a case.

For employers, the practical reality is clear: AI is changing not only how lawsuits are filed, but also how they are litigated.

AI Is Fueling an Increase in Pro Se Employment Claims

Employment litigation has seen a noticeable increase in self-represented plaintiffs over the past several years.  According to the LexMachina 2026 Employment Litigation Report, pro se employment filings increased from approximately 2,000 cases in 2021 to more than 4,300 cases in 2025—more than doubling in just four years. Many employment defense firms have similarly reported significant increases in AI-assisted filings.

Although AI has improved access to legal information, it has also made it easier for individuals to draft complaints, respond to motions, and pursue litigation without fully understanding the legal standards governing their claims.

Why AI-Generated Cases Can Cost Employers More

Contrary to what many employers expect, lawsuits filed by unrepresented plaintiffs are not always less expensive to defend.  In fact, many employment defense attorneys report that AI-assisted pro se cases often require more attorney time than traditionally filed cases.  Common challenges include:

• Numerous motions that lack legal merit but still require formal responses;
• Extremely broad or repetitive discovery requests;
• Procedural misunderstandings that prolong litigation; and
• Unrealistic expectations regarding case value and potential damages.

For example, some defense firms have reported cases in which a single pro se litigant filed dozens of motions and hundreds of written discovery requests, requiring significant defense resources simply to manage the litigation process.  The result is longer case timelines and increased litigation costs—even when the underlying claims ultimately lack merit.

Courts Are Responding to AI in Different Ways

Courts across the country have begun developing rules governing the use of AI in legal filings. One of the primary concerns is that AI platforms occasionally generate inaccurate legal analysis or even fabricate court decisions and citations—a phenomenon commonly referred to as “hallucination.”  

To address these risks, courts have adopted a variety of approaches. Some courts now require parties to disclose when AI was used to prepare filings and certify that all legal citations have been independently verified.  Other courts have implemented certification requirements confirming that every cited authority actually exists and has been reviewed for accuracy.  A handful of judges have gone even further by prohibiting the use of AI in certain aspects of legal research or, in some instances, banning AI-generated filings altogether.

Although the approaches vary, the underlying objective is consistent: ensuring that court filings remain accurate, truthful, and professionally prepared.

AI May Also Affect Settlement Negotiations

Another trend employers are beginning to encounter is inflated settlement expectations. Generative AI tools often produce optimistic estimates of damages or suggest legal theories that may not accurately reflect the facts or applicable law. As a result, some self-represented plaintiffs enter negotiations believing their claims are worth substantially more than they realistically are.  This can make early settlement more difficult and, in some cases, encourage litigation that previously might have resolved quickly.  Employers should therefore evaluate settlement opportunities based on the actual legal merits of the case rather than assumptions about how quickly a pro se matter will resolve.

Practical Steps Employers Can Take

As AI becomes increasingly common in employment litigation, employers can reduce risk by adopting a proactive approach.  Consider the following best practices:

1. Carefully review legal citations.  AI-generated filings occasionally cite cases or legal authorities that do not exist or inaccurately describe the law. Employers and their counsel should verify all authorities cited in litigation and promptly raise any inaccuracies with the court when appropriate.
2. Manage discovery early. When discovery requests become excessive or disproportionate, early communication with opposing parties—and, when necessary, motions for protective orders—can help control costs before discovery expands unnecessarily.
3. Set realistic litigation expectations. Not every pro se case will settle quickly. Employers should recognize that AI-generated legal documents may encourage plaintiffs to pursue litigation longer than they otherwise might have, making early case evaluation and litigation strategy increasingly important.
4. Focus on compliance before litigation begins. Regardless of who prepares a complaint, the strongest defense remains the same: well-documented employment decisions, compliant wage-and-hour practices, consistent policy enforcement, and accurate recordkeeping.

Forework is the ONLY attorney-designed and operated payroll and HR SaaS company, automating compliance in a dynamic way as the laws change. If your company wants to be in a strong position for the rapidly changing, but never less complicated, workplace landscape, work with Forework.

Employment law changes often require more than simply updating a handbook. They can affect payroll configuration, leave tracking, employee notices, recordkeeping, offboarding, and other day to day HR procedures.

At Forework, we anticipate regulatory changes that affect payroll and HR administration and work to incorporate those changes into the systems, policies, and procedures our clients rely on. The goal is to help businesses stay ahead of new requirements rather than discover too late that their processes are no longer aligned with the law.

The new NYC Paid Safe and Sick Leave rules are a timely example of why that proactive approach matters.

The New York City Department of Consumer and Worker Protection (DCWP) has issued final regulations implementing the 2026 amendments to the Earned Safe and Sick Time Act (ESSTA). While many of the final rules mirror the agency’s proposed regulations released earlier this year, several important revisions create new administrative, payroll, and recordkeeping obligations for employers. The new rules take effect July 23, 2026, giving employers a limited window to review policies, update payroll systems, and modify leave administration procedures.

What’s Changing?

The 2026 amendments significantly expanded employees’ protected leave rights by:

• Creating a new 32-hour annual bank of unpaid protected time off that is available immediately;
• Expanding the qualifying reasons employees may use protected leave;
• Codifying up to 20 hours of paid prenatal leave; and
• Updating notice, payroll, and recordkeeping requirements.

The newly finalized regulations provide additional guidance on how employers are expected to administer these expanded leave entitlements.

New Offboarding Requirement for Former Employees

One of the most significant changes affects how employers provide leave records after an employee leaves the company.  Under the final rules, employers that maintain electronic payroll or leave tracking systems must now either:

• Continue allowing former employees to access their leave information electronically for six months after separation, or
• Provide a written statement showing the employee’s required leave information within one week after the employee’s final payday.

This is a new compliance obligation that was not included in the original proposal.

What Employers Should Do

Many employers automatically deactivate employee access to HR and payroll systems immediately upon separation. Those employers should review their offboarding procedures to ensure they can either maintain limited post-employment access or timely provide the required written leave statement.

Unused 32-Hour Leave Must Be Restored Upon Rehire

The final regulations also clarify an employer’s obligations when rehiring former employees. If an employee leaves employment and is rehired during the same calendar year, the employer must restore any unused portion of the employee’s 32-hour unpaid protected leave bank. This requirement is separate from the existing ESSTA rules governing reinstatement of accrued paid leave.

Clarification on the New 32-Hour Unpaid Leave Bank

The regulations provide additional guidance regarding the administration of the new unpaid leave entitlement. Employers may choose to provide some—or even all—of the required 32 hours as paid leave instead of unpaid leave. However, the regulations make clear that doing so does not eliminate the employer’s separate obligation to provide paid sick and safe leave under ESSTA’s existing accrual or frontloading requirements. In other words, employers cannot substitute the new 32-hour leave entitlement for their existing paid sick leave obligations.

Paid Leave Generally Must Be Used First

The final rules also explain how employers should administer leave when employees have both paid and unpaid protected leave available.  In most situations, if an employee requests leave for a qualifying reason and has available paid protected leave, the employer must apply the paid leave first unless the employee specifically elects to use unpaid leave instead. Only after available paid leave has been exhausted may the employer rely on the separate unpaid 32-hour leave bank.

Updated Recordkeeping and Payroll Requirements

The final regulations continue the City’s emphasis on accurate leave administration and documentation.  Among other changes, employers should ensure their systems can:

• Track paid and unpaid leave separately (unless all protected leave is provided as paid leave);
• Reflect the expanded categories of protected leave;
• Maintain required payroll and leave records; and
• Comply with updated notice and pay statement requirements.

For employers using HRIS or payroll software, these changes may require system updates before the July 23 effective date.

What Employers Should Do Now

Before the new rules become effective, employers should:

• Review and update employee handbooks and leave policies;
• Confirm that payroll and HR systems properly track the expanded leave entitlements;
• Update offboarding procedures to address post-separation leave record requirements;
• Review rehire procedures to ensure unused leave is restored when required; and
• Train HR personnel, payroll staff, and supervisors on the new rules.

When was the last time your payroll company through so far ahead for your business, and actually programmed the new law into payroll and HR, without you having to ask?  With Forework, clients always have peace of mind that they are on track.