PREDICTIONS FOR 2026
2025 PREDICTIONS RECAP
HOSPITALITY
Immigration Enforcement Will Continue to Impact Labor Market In addition to ongoing staffing shortages, we expect that hospitality employers – and restaurants in particular – will feel the impact of increased immigration enforcement and tighter restrictions on employment-based visas. These changes are likely to affect seasonal hiring and certain categories of temporary foreign workers. Employers should closely monitor changes, ensure I-9 compliance, and review workforce planning strategies. Spotlight on Human Trafficking Many employers may not realize that you do not have to be a “trafficker” to be held liable for trafficking. Companies across industries, including hospitality, are facing civil lawsuits and criminal investigations related to sex trafficking activities. One of the most striking developments in the anti-trafficking enforcement is the growing use of corporate criminal liability to hold businesses accountable. This highlights the importance of implementing comprehensive policies, training, reporting mechanisms, and risk assessments. More Clarity on 80/20/30 Tip Credit Rule In 2024, the 5th Circuit struck the Biden DOL’s 80/20/30 rule, which applied to employers that take the tip credit toward their minimum wage obligation under the FLSA. For employers in Texas, Louisiana, and Mississippi – which are covered by the 5th
Circuit’s ruling – it appears clear that the 80/20/30 rule and the early 80/20 rule are dead. For employers outside the 5th Circuit, though, the picture is less clear. We expect further clarification on this issue in 2026, especially given the compliance challenges the rule has created for hospitality employers. Wage Hikes Will Impact Operations At least 19 states will be raising the minimum wage in 2026, as well as many localities, and some states are also raising or scrapping the tipped minimum wage. All of this will put a strain on hospitality employers that already run on low margins. So, it’s a good idea to develop a strategic plan to ensure you’re ready for the impact on staffing, operations, and the bottom line.
As we predicted, hospitality employers continued to face major staffing shortages in 2025, which strained operations and impacted customer service, as well as the bottom line. Kitchen staff and housekeepers were among the hardest roles to fill. Additionally, immigration restrictions and heightened enforcement efforts had a major effect on the hospitality industry – especially regarding the use of staffing agency employees. Staffing Shortages Were Still a Critical Concern President Trump vowed to support legislation that ends federal income taxes on tips for hospitality workers – and Congress delivered him a win. While we correctly anticipated significant opposition, we were surprised to see the measure pass as part of the “One Big Beautiful Bill” in July. Certain tipped and non-exempt workers will be able to deduct significant portions of their tip (and overtime) income from federal taxes starting in Tax Year 2025. For employers, this could potentially make hospitality and similar jobs more attractive and assist with your recruitment and retention efforts. “No Tax on Tips” Surprise
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OUR PREDICTIONS WERE SOMEWHAT RIGHT
HOW DID WE DO?
Alden J. Parker Sacramento/San Francisco Regional Managing Partner, Co-Chair
MORE FROM 2025
Clarity on Wage Issues The DOL issued opinion letters in September finding that an oyster shucker who works in the front of the house is allowed to share in the tip pool – and a hotel restaurant and related members’ club are joint employers for overtime purposes. While the opinion letters apply only to the specific facts as presented, the analyses can serve as a roadmap for hospitality sector employers, including for hosts and hostesses who are front of house employees with substantial customer interaction.
Andria Lure Ryan Atlanta Partner, Co-Chair
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