Complying with the OBBBA overtime rule

In mid-2025, the OBBBA introduced a new income tax deduction for employees who worked weekly overtime under the Fair Labor Standards Act. Employees may deduct the premium portion of their overtime pay (the "half" in "time-and-a-half") from their taxable wages subject to federal income tax.

That means payroll systems like Everee must report FLSA premium wages in a new box on the Form W-2. In order to facilitate this, all timekeeping and payroll systems must track overtime hours earned under the 40-hours-per-week FLSA rule separately from overtime hours under state rules, since overtime under state rules is not qualified for the OBBBA tax deduction.

If you use Everee's built-in overtime classification module, you don't need to do anything. We've already updated our systems to handle OBBBA compliance for you automatically.

However, if you send pre-classified hours to us, you'll need to update your integration. Keep reading.

In November 2025, we rolled out an update to our Timesheets API to make sure you can send pre-classified hours in a way that's compliant with the OBBBA rule.

❗️
This is more urgent than usual
We take API stability seriously. In the rare event we need to make a breaking change to our APIs, we always provide a deprecation timeline of months or even years. This case is unusual because of the urgent rollout timetable of the OBBBA and the delay in IRS guidance to employers, payroll, and timekeeping systems.
It's really important to make this change to your integration as soon as possible. The Form W-2 must reflect FLSA-qualified premium wages for the 2026 tax year, so this change matters on January 1 2026.

Overview of changes

Previously, the Timesheets API supported sending overtime hours in a single, undifferentiated field called "overtime". With this update, this single field has been split into two new fields: "FLSA overtime" and "non-FLSA overtime". This allows you to specify the difference between overtime under FLSA (over 40 hours in a week) and all other overtime.

The existing undifferentiated "overtime" fields have been deprecated. They continue to work as usual, but due to the rapid rollout timeline of the new OBBBA rule, we have to require migration on a faster timeline than normal. These existing fields will stop working on April 1 2026 and integrations still using them will start receiving errors. See below for the deprecation timeline.

Here are the detailed changes to the Timesheets API that may affect your integration:

If you use the "Classified Hours for Pay Period" endpoint

In the Update classified hours for pay period (bulk) endpoint, the field called overtimeHoursWorked has been deprecated. It's been replaced with two new fields:

flsaQualifiedOvertimeHoursWorked: the hours worked under FLSA (i.e. over 40 hours in a week). Overtime premium wages for these hours are subject to the OBBBA income tax deduction.
nonFlsaQualifiedOvertimeHoursWorked: all other overtime hours worked under non-FLSA rules. Overtime premium wages for these hours are not covered under OBBBA.

Premiums for hours under the flsaQualifiedOvertimeHoursWorked field will be reported on employees' Form W-2s and other forms as qualified for the OBBBA income tax deduction.

If you use the "Shift" endpoints

In the Create a shift on a timesheet or Update a shift on a timesheet endpoints, the field under the path fullyClassifiedHours.type has changed. The enum value OVERTIME has been deprecated and replaced with two new enum values:

FLSA_QUALIFIED_OVERTIME: the hours worked under FLSA (i.e. over 40 hours in a week). Overtime premium wages for these hours are subject to the OBBBA income tax deduction.
NON_FLSA_QUALIFIED_OVERTIME: all other overtime hours worked under non-FLSA rules. Overtime premium wages for these hours are not covered under OBBBA.

Premiums for hours under the FLSA_QUALIFIED_OVERTIME field will be reported on employees' Form W-2s and other forms as qualified for the OBBBA income tax deduction.

Deprecation timeline

November 2025: the new fields become available in the Timesheets API for our clients to start using.
January 1 2026: the 2026 tax year begins. All FLSA overtime premium wages paid to employees are now required to be reported accurately on the 2026 Form W-2.
April 1 2026: the deprecated "overtime" fields in the Timesheets API stop working. Any clients still using these fields will begin receiving errors.