Labor & Employment Law Daily Wrap Up, FEDERAL LEGISLATION—Trump’s Big Beautiful Bill passed without many original anti-federal worker provisions, (Jul 8, 2025)

By Patricia K. Ruiz, J.D.

The BBB also reduces taxes paid by certain workers and expands immigration enforcement.

On July 1, 2025, the Senate narrowly passed the Trump administration’s One Big Beautiful Bill Act (BBB), the final version of which dropped a number of anti-federal worker provisions. The version of the bill passed by Congress includes provisions allowing workers to deduct certain tips and overtime pay from their taxable income, introducing new requirements for Medicaid eligibility, making changes to health savings account (HSA) and dependent care flexible spending account (FSA) requirements, and expanding immigration enforcement. The American Federation of Government Employees (AFGE) provided insight into provisions of the BBB affecting workers.

Federal worker protections. The AFGE touted in an article its work in opposing measures in the bill “that would have devastated the federal workforce, the civil service, and unions’ ability to perform [their] mission to represent federal employees in the workplace.” Provisions excluded from the final version of the bill include: (1) a provision making future federal employees at-will, depriving them of civil service protections against unfair treatment and disciplinary actions, protection against discrimination, and rights to organize and join a union; (2) a provision imposing a 10 percent tax on union dues collected through payroll; (3) a provision requiring unions to pay the entire cost of official time for union representatives, plus all union office space and resources; (4) a provision imposing a $350 filing fee for claims and appeals filed with the Merit Systems Protection Board (MSPB); (5) a provision requiring all federal workers to contribute 4.4 percent of their paychecks to the Federal Employees Retirement System; (6) a provision significantly reducing pension amounts by changing the way pensions are calculated from their three highest-paid years to their five highest-paid years; (7) a provision allowing the administration to unilaterally reorganize and shut down agencies created by Congress without congressional approval; and (8) a provision charging new federal employees 9.4 percent of their salaries unless they permanently renounce their labor protections under Title 5 and become at-well employees.

Tax-free tips and overtime. A provision included in the passed version of the BBB allows workers earning $150,000 or less in 2025 to deduct $25,000 in tips annually from their taxable income. Any tips passing that threshold will be federally taxed. The provision restricts tax-free tips to workers in occupations that “customarily and regularly received tips.” The bill does not identify the jobs specifically but requires the Treasury Department to publish a comprehensive list of eligible tipped occupations by October 2. The provision received bipartisan support in Congress. For overtime deductions, workers must receive overtime pay as defined by the Fair Labor Standards Act (FLSA). The deduction applies to the amount of pay above the hourly rate. The maximum deduction for overtime income is $12,500 per year.

Medicaid eligibility. The BBB introduces stricter work requirements for Medicaid eligibility. Adults 19 to 64 in the Medicaid expansion group must complete at least 80 hours per month of work, job training, education, or approved community service to maintain eligibility, unless an exemption applies.

HSA, dependent care FSA expansions. The bill introduces targeted expansions to health savings accounts (HSAs) to allow employers and employees pandemic-era flexibility in how they use pre-tax health dollars. The bill also increases the limit for dependent care flexible spending account (FSA) contributions for the first time since 1986.

Immigration enforcement. The BBB provides a large increase in funding for the operations of Immigration and Customs Enforcement (ICE) and border Protection (CBP), expanding immigration enforcement resources and capabilities.

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