The “Big Beautiful Bill”: What Employers Need to Know

In early 2025, Congress passed a sweeping piece of federal legislation known as the “Big Beautiful Bill,” a cornerstone of the administration’s economic agenda. This comprehensive federal budget bill includes several major changes aimed at improving wage equity and labor standards nationwide. For employers—particularly in California and other states with robust labor laws—it’s important to understand how these federal changes may intersect with existing practices and what adjustments may be required.

Key Provisions Affecting Employers

One of the most significant components of the bill is the redefinition of federal overtime eligibility. Effective January 1, 2026, the Department of Labor will implement a higher minimum salary threshold for employees to qualify as exempt from overtime. The new threshold will rise from the current $43,888 annually to $55,000, with planned automatic adjustments every three years.

Additionally, the bill increases enforcement funding for the DOL’s Wage and Hour Division, signaling more audits and investigations into wage practices. Employers should ensure their classifications of exempt and non-exempt employees are accurate and up to date.

The bill also contains funding and incentives for small businesses that adopt certain employee equity and wage transparency practices, although specific grant programs are still in development.

California Employers: Dual Compliance Matters

California employers are already subject to some of the nation’s strictest wage and hour laws, with a higher minimum salary threshold for exempt employees than the new federal level. As a result, many California employers may not need to make major changes. However, multi-state employers must pay close attention to ensure compliance with both state and federal regulations, whichever is more protective of employees.

Next Steps

Employers should review current pay practices, audit job classifications, and ensure policies are consistent with both current California law and the forthcoming federal standards. HR teams should also anticipate increased employee awareness and inquiries regarding exempt status and wage transparency.

While the Big Beautiful Bill introduces substantial changes, it also presents an opportunity for employers to strengthen compliance practices and demonstrate their commitment to fair pay. If you have any questions about how these changes may affect your organization, please contact your Human Resources Business Partner.