To enforce the Immigration Reform and Control Act, the federal government may initiate administrative inspections of employer compliance. While agencies such as the U.S. Department of Labor and the Department of Justice have authority to investigate, most Notices of Inspection (NOIs) are issued by Homeland Security Investigations, a division of the Department of Homeland Security.When an employer receives an NOI, they are granted a minimum of three business days to gather and produce the requested documentation. These requests often include more than just Form I-9s—they may also cover payroll records, lists of current and former employees, business licenses, and other employment-related documents.Under California law, employers must notify all current employees within 72 hours of receiving an NOI. This notice must:

• Be posted in the language typically used for workplace communications;
• Include the name of the immigration agency conducting the inspection;
• State the date the employer received the NOI;
• Describe the nature of the inspection (if known); and
• Provide a copy of the NOI.

If employees are represented by a union, the same notice must be sent to their bargaining representative.
Once the federal agency completes its review, it will provide written results. These may include:

• A letter confirming full compliance;
• A notice of technical or procedural I-9 violations; or
• A “Notice of Suspect Documents,” indicating that certain employee documents may be fraudulent or insufficient to establish work authorization.

Employers must take appropriate steps based on the results, which may include making corrections or taking other remedial action.
If any employees are flagged as having possible work authorization issues, California law requires employers to notify each affected employee directly—along with any collective bargaining representative—within 72 hours of receiving the inspection findings. The notice must include:

• A copy of the agency’s notice to the employer; and
• A written summary of the employer’s and employee’s rights and obligations, including:
  • A description of the specific issues found;
  • Deadlines for correcting them;
  • The date and time of any scheduled meetings to address the issues; and
  • The employee’s right to have a representative present during those meetings.

To prepare for potential inspections and reduce risk, employers are strongly encouraged to conduct regular internal audits of Form I-9 records. These audits should be thorough, non-discriminatory, and designed to identify and correct errors before they are flagged by authorities.

For example, audit selection criteria should not target employees based on citizenship status or perceived national origin, as doing so may result in discrimination claims.

Employers are advised to consult with legal counsel when planning audits or responding to NOIs to ensure compliance with federal and state laws.

Source: CalChamber

Federal Tax Deductions for Tipped and Hourly Workers (TY2025–TY2028)
New federal tax provisions will allow tipped and hourly employees to deduct substantial portions of tip and overtime earnings, potentially making hospitality and similar roles more financially appealing.

Eligibility Criteria

• Individuals must earn $150,000 or less in 2025; married couples may earn up to $300,000 combined
  (Thresholds will be adjusted for inflation in future years)

Tip Income Deduction

• Applicable to jobs where tipping is standard—e.g., servers, bartenders, hotel staff, hairstylists, etc.
  (A complete list will be published by the Treasury Department by October 2)
• Only cash tips—including credit card tips, shared tips, and tips reported to employers for payroll tax purposes—are eligible
• Maximum annual deduction: $25,000

Overtime Income Deduction

• Must receive overtime pay as defined by the Fair Labor Standards Act (FLSA):
  Payment for hours worked beyond 40 per week at a premium rate
• Deduction applies only to the premium portion—the pay received above the regular hourly rate
• Maximum annual deduction:
  • $12,500 for individuals
  • $25,000 for couples filing jointly

Source: Fisher Phillips

Federal Tax Deductions for Tipped and Hourly Workers
WHAT BUSINESSES NEED TO BE DOING NOW

The tax deduction for employer-provided meals is being largely eliminated under the new law.  As a result, organizations may reassess the scope of meals and snacks offered to employees.The OBBBA makes permanent the tax exclusion for employer-paid reimbursement of qualified student loans under IRS Section 127. HR or leadership may consider expanding participation in such programs, as they now carry enduring tax advantages.The tax credit for employers offering paid family and medical leave is also permanently extended, providing ongoing financial incentives for supporting work-life balance.The law updates HSA eligibility and reimbursement policies, including a retroactive restoration of the telehealth provisions introduced during the COVID-19 pandemic under the CARES Act.  Employers should review plan documents to ensure alignment with new standards.Beginning in 2026, the OBBBA increases the annual exclusion amount for dependent care FSAs, offering expanded tax relief for participating employees.

• Employees who receive child care or adoption benefits from employers will see:
  • An increase in the maximum employer-provided child care credit
  • A partially refundable adoption assistance credit, expanding accessibility for families

Source: SHRM

We invite you to reach out to us for support on matters such as reviewing your employee handbook, crafting policies, employee relations issues, benefits management, scheduling and training employees on Harassment Prevention Training, or any other HR matters.  Please feel to reach out to us at [email protected] for support.