Summary of July 2025 Labor Law Updates for Birmingham, Alabama
Welcome to our July 2025 labor and employment law update for Birmingham, Alabama, brought to you by the Birmingham team from HKM Employment Attorneys. This overview delivers key legal developments from the past month—including legislation, court rulings, and enforcement actions—designed to keep employers, HR professionals, and employees informed and compliant.
July 2025 saw several important developments in Alabama labor and employment law—from legislative changes around overtime taxation to federal court rulings affecting both individual rights and workforce programs. Employers, HR teams, and employees must stay vigilant and proactive in adjusting policies, payroll systems, and compliance frameworks. If you have questions about any of these updates or how they affect your workplace, feel free to reach out to HKM Employment Attorneys at https://hkm.com for guidance and legal support.
Overtime Income Tax Exemption Sunset – Legislation / Employer Guidance
Date: Takes effect July 1, 2025
Summary: Alabama’s temporary exemption from state income tax on overtime pay under Act 2024‑437 expired on June 30, 2025. Beginning July 1, employers are required to resume withholding state income tax on overtime wages paid to non-exempt employees. Overtime earned on or before June 30 but paid in July may still be treated as exempt in reporting. Employers must ensure that exempt overtime is reported correctly in Box 14 of W‑2 forms, using the “EX OT WAGES” indicator, and excluded from Box 16.
Implications: This change directly impacts payroll processes for Alabama employers. HR and payroll departments must update withholding systems to reinstate state income tax on overtime wages and adhere to reporting guidelines to avoid penalties and ensure employee tax compliance.
Independent Contractors’ Portable Benefits Program – Legislation
Date: Announced July 31, 2025
Summary: Alabama enacted a voluntary, tax-advantaged portable benefits program for independent contractors, allowing contractors to access benefits irrespective of employment with any single entity.
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Implications: This program benefits companies that rely on independent contractors—like gig platforms and consultancies—by offering an attractive benefits option to contractors without statutory obligations of full employment. Employers should consider integrating this into contractor agreements to boost retention and contractor satisfaction.
Williams v. Reed – U.S. Supreme Court Ruling
Date: Decided February 21, 2025 (development resurfaced in July discussions)
Summary: In Williams v. Reed, the U.S. Supreme Court held that state procedural requirements demanding exhaustion of administrative remedies cannot block §1983 claims when they create a “catch-22” for plaintiffs. Alabama state courts had dismissed claims by unemployment benefit applicants for failure to exhaust internal remedies. The Supreme Court reversed that reasoning, ensuring plaintiffs may sue even before exhausting state processes.
Implications: This decision affects public-sector employers and agencies in Alabama. It affirms that delays or inaction by state agencies (like the Department of Labor) can be challenged in court under federal civil rights law without exhausting administrative appeals—prompting agencies and policymakers to ensure administrative processes are timely and fair.
Child Labor Law Enforcement – Federal Department of Labor Action
Date: July 28, 2025
Summary: The U.S. Department of Labor secured a consent judgment against an Alabama poultry processor found in violation of child labor laws. The company must pay $385,000 in civil penalties and is prohibited from future violations of federal child labor regulations.
Implications: This enforcement underscores federal commitment to child labor protections. Employers in Alabama—especially in agriculture and processing sectors—must review policies, conduct compliance audits, and ensure robust training to prevent underage employment or hazardous assignments.
Job Corps Centers Halted Closure – Federal Court Ruling
Date: July 29, 2025
Summary: A federal judge ruled that the U.S. Department of Labor violated procedural requirements under the Workforce Innovation and Opportunity Act (WIOA) when attempting to close management contracts for Job Corps centers. As a result, centers in Gadsden and Montgomery remain operational pending proper notice-and-comment procedures.
Implications: This decision maintains access to workforce training services in those Alabama communities. Employers and workforce agencies should monitor any further legal developments and potential service shifts. The ruling emphasizes that federal agencies must follow statutory processes before disrupting workforce infrastructure.
Conclusion: Looking Back on Alabama Labor Law Updates from July 2025
In light of Alabama court decisions involving wage and hour violations, contract disputes, discrimination, and whistleblower protections, local representation matters more than ever. At HKM Employment Attorneys in Birmingham, our largest plaintiff-side employment law team handles breach of contract, non-compete agreements, unpaid wages, and many more areas of employment and labor law. With award‑winning contract review, earnings recovery, and confidential, no‑fee‑unless‑we‑win advocacy, our Birmingham attorneys are equipped to translate recent case law into actionable legal strategies. If these stories hit home, don’t hesitate to contact our Birmingham office to explore how we can protect your rights locally
