US Employment Law Updates 2026

Each year brings significant changes to the US labor and employment landscape, and 2025 was no exception, from a new presidential administration to growing trends in paid family and medical leave programs, neonatal and other leave entitlements, and artificial intelligence.

As a USA Employer of Record, Workwell Global is here to help guide you through the ever-evolving landscape of US employment laws with our latest round of updates for 2025. We hope this guide on US employment laws for 2025 will help your business be prepared for any changes and their impacts.

Please note, the following is a brief list of labour and employment laws for 2026. If you are an existing client of Workwell Global, please reach out to your Business Manager for an extensive, detailed list of important updates stored in our Client Toolkit!

Key US Employment Law Updates: Q3-Q4 2025

The second half of 2025 brought significant changes to US employment law at both the federal and state level. With a new presidential administration in place, employers saw major developments affecting federal tax policy, immigration, AI in hiring, workplace safety, leave entitlements, and pay transparency.

Federal Employment Law Updates

One Big Beautiful Bill Act (OBBBA)

Signed into law on July 4, 2025, the One Big Beautiful Bill Act introduced sweeping tax changes impacting both workers and employers. A major provision allows employees to deduct certain overtime pay from their taxable income for tax years 2025–2028.

Under the Act, workers may deduct the portion of overtime pay that exceeds their regular hourly rate (the “half” portion of time-and-a-half pay) when that overtime is required by the Fair Labor Standards Act (FLSA). The deduction is capped at $12,500 annually ($25,000 for joint filers) and phases out for higher earners.

Importantly for employers, only FLSA-mandated overtime qualifies—overtime required solely by state law does not. Employers must report qualified overtime compensation, although the IRS confirmed it will not penalise employers for failing to separately report this amount for tax year 2025.

H-1B Visa Restrictions

In September 2025, a new presidential proclamation introduced a $100,000 fee for new H-1B visa petitions filed after September 21, 2025, including petitions submitted for the 2026 lottery. The rule does not apply to extensions, amendments, or changes of status for individuals already in the US. Legal challenges are ongoing, with early rulings expected before the March 2026 lottery.

Massachusetts Judge Blocks $100,00 H-1B Visa Fee

Effective: June 8th, 2026

A federal judge in Massachusetts struck down President Trump’s $100,000 H-1B application fee. The fee was enacted in September 2025 in a presidential proclamation, for new H-1B workers entering the US on or after September 21, 2025. Prior to the proclamation, H-1B visas ranged from $2,000 to $5,000. In his ruling, Judge Leo Sorokin determined that the $100,00 fee acted as an unlawful tax, not just a regulatory fee, which Congress never authorized. As a result, the fee has been vacated in its entirety.

A spokesperson for the White House has indicated that the Trump administration would appeal the decision, stating, “A federal judge in Washington already upheld a nearly identical order, and the Administration is confident this order will be reversed on appeal.”

End of Automatic EAD Extensions

An interim final rule issued by the Department of Homeland Security in October 2025 ended the automatic extension of Employment Authorization Documents (EADs) for most renewal applicants. Automatic extensions of up to 540 days no longer apply to applications filed on or after October 30, 2025, with limited exceptions for certain protected statuses.

State and Local Employment Law Changes

California: Regulation of AI and Automated Decision Systems

Effective October 1, 2025, California introduced final rules regulating automated decision systems (ADS) in employment. Employers with five or more employees may not use AI-driven tools that discriminate against applicants or employees based on protected characteristics.

The rules apply to technologies such as résumé screening software, targeted job ads, algorithmic assessments, and interview analysis tools. Employers must provide reasonable accommodations for applicants with disabilities or based on religious creed. Notably, third-party vendors may also face liability for discriminatory AI systems.

Illinois: Warehouse Tornado Preparedness

The Illinois Warehouse Tornado Preparedness Act took effect on December 13, 2025. Covered warehouse operators must implement site-specific tornado safety plans, coordinate with local emergency services, and file plans with relevant fire and emergency management authorities.

Maryland: Expanded Parental Leave Rights

Maryland amended its Parental Leave Act effective October 1, 2025. Employers with 15–49 employees must now provide up to six weeks of unpaid parental leave for birth, adoption, or foster placement. This amendment clarifies that the Act does not apply to employers covered under the federal Family and Medical Leave Act for the year.

Ohio: Expanded Anti-Discrimination and Pay Transparency

Cuyahoga County expanded its CROWN Act protections in November 2025, explicitly covering discrimination based on hair texture and hairstyles associated with race or national origin.

In Columbus, amendments to the city’s salary transparency law now require employers with 15 or more employees to include a reasonable salary range in job postings. While enforcement begins in 2027, employers are encouraged to prepare now—particularly for remote roles.

Pennsylvania: Broader Anti-Discrimination Protections

Pittsburgh updated its anti-discrimination ordinance effective December 10, 2025, extending protections to individuals based on both actual and perceived membership in protected classes. Newly clarified protections include hair texture, immigration status, preferred language, housing status, and medical marijuana patient status.

Key US Federal Employment Law Updates for 2026

As employers prepare for 2026, several federal employment, payroll, benefits, and compliance thresholds have been updated. These changes affect overtime classification, retirement contributions, healthcare affordability, and the evolving regulatory landscape for artificial intelligence in the workplace.

Overtime Exemption Salary Thresholds

Under the Fair Labor Standards Act, employees must generally earn at least $684 per week ($35,568 annually) to qualify for exemption from overtime pay, subject to limited exceptions.

While the federal threshold remains unchanged for 2026, several states and local jurisdictions have implemented higher exemption salary requirements, which take precedence over federal law. Employers with workers in impacted jurisdictions should review classifications carefully to ensure continued compliance.

Computer Employee Exemption Updates

For 2026, multiple states increased the minimum pay required to classify computer employees as overtime-exempt:

• California: $58.85 per hour or $122,573.13 annually
• Colorado: $34.85 per hour
• Washington: $59.96 per hour

These thresholds apply regardless of federal exemption standards and may require salary adjustments or reclassification.

Highly Compensated Employee (HCE) Thresholds

Colorado increased its highly compensated employee exemption for 2026. The annual compensation threshold rose from $127,091 in 2025 to $130,014 in 2026, impacting exemption eligibility for certain senior or specialized roles.

Retirement and Savings Plan Updates for 2026

401(k) Highly Compensated Employee Threshold

For retirement plan purposes, the federal definition of a highly compensated employee remains unchanged. Employees earning $160,000 or more will continue to be treated as HCEs for 2026 when assessing plan nondiscrimination rules.

Traditional 401(k) Contribution Limits

Employee contribution limits increased for 2026:

• Standard contribution limit: $24,500 (up from $23,500 in 2025)
• Catch-up (age 50+): $8,000 (up from $7,500)

Under SECURE 2.0, enhanced catch-up contributions remain available for employees aged 60–63. For 2026, the higher catch-up limit stays at $11,250.

Roth IRA Contribution Updates

Roth IRA contribution limits also increased:

• Standard contribution limit: $7,500
• Catch-up (age 50+): $1,100

Unlike some retirement limits, IRA catch-up contributions are not automatically adjusted annually, making this increase particularly notable for older workers.

Health and Benefits Compliance Changes

Health Savings Account (HSA) Contribution Limits

Federal inflation adjustments increased HSA contribution caps for 2026:

• Self-only coverage: $4,400
• Family coverage: $8,750

These updated limits apply regardless of employer contribution levels.

Affordable Care Act (ACA) Affordability Threshold

The Affordable Care Act affordability threshold will increase to 9.96% of household income for plan years beginning in 2026, up from 9.02% in 2025. This threshold determines whether an employer’s lowest-cost health plan meets ACA affordability requirements and may affect employer shared responsibility penalties.

Federal Action on Artifical Intelligence Regulation

Executive Order on National AI Policy Framework

On December 11, 2025, President Trump issued an Executive Order aimed at establishing a single national framework for artificial intelligence regulation, challenging the growing patchwork of state AI laws.

The Order emphasizes reducing regulatory burdens on AI development and explicitly references concerns with state-level AI laws, including Colorado’s. It directs senior federal advisors to develop legislative recommendations that would preempt conflicting state AI regulations.

The Order also mandates the creation of an AI Litigation Task Force within the Department of Justice to challenge state AI laws deemed inconsistent with the forthcoming federal framework.

State-by-State Employment Law Updates:

• California
• Colorado
• Connecticut
• Delaware
• Illinois
• Maine
• Maryland
• Minnesota
• New Jersey
• New York
• Oregon
• Pennsylvania
• Tennessee 
• Virginia
• Washington

California

Expanded Sick and Safe Leave Uses

Effective: January 1, 2026

California has expanded the permitted uses of paid sick and safe leave. Employees may now use paid or unpaid safe leave if they or a family member are victims of certain crimes and are attending related judicial proceedings. Paid sick leave may also be used when an employee appears in court as a witness pursuant to a subpoena, serves on a jury, or is otherwise required to attend court proceedings related to a crime.

Pay Data Reporting Amendments (FEHA)

Effective: January 1, 2026 (additional changes January 1, 2027)

California amended its pay data reporting rules under FEHA. Covered employers and labor contractors must store demographic data separately from personnel records beginning January 1, 2026. Effective January 1, 2027, the number of reportable job categories will expand from 10 to 23.

San Francisco – Health Care Security Ordinance (HSCO)

Effective: January 1, 2026

For employers with 100 or more employees nationwide, San Francisco’s required healthcare expenditure rate increases to $4.11 per hour. The ordinance also raises the compensation threshold exempting managerial, supervisory, and confidential employees to $128,861 annually (or $61.95 per hour).

Prohibition on Stay-or-Pay and Training Repayment Provisions

Effective: January 1, 2026

California enacted a new law prohibiting most repayment, retention, and stay-or-pay provisions tied to the end of employment. Employers may not require repayment of training costs, immigration expenses, recruitment fees, or similar “debts” upon termination, subject to narrow exceptions. Existing agreements are not impacted.

Pay Transparency Clarification

Effective: January 1, 2026

California clarified that a “pay scale” means a good-faith estimate of the salary or hourly wage reasonably expected to be paid at hire. Employers with 15 or more employees must include pay scales in all job postings.

Data Security Breach Notification Amendments

Effective: January 1, 2026

Businesses must notify affected individuals of data breaches within 30 calendar days of discovery. If a breach affects more than 500 California residents, the Attorney General must also be notified within 15 days of consumer notification.

CCPA – Automated Decision-Making Technology (ADMT)

Effective: January 1, 2026

Employers subject to the CCPA that use automated decision-making technology for significant employment decisions must complete risk assessments, provide pre-use notices, allow opt-outs in certain cases, and offer access rights explaining how ADMT was used.

Workers Compensation Updates

Effective: 2026 

California law requires end hirers based in California to hold their own workers’ compensation policy if they have one or more internal employees. This requirement applies regardless of employment length or hours worked. This means your client, as the end hirer, if they are located in California, will also need to hold a workers compensation policy to cover their internal employees or they could be out of compliance with the California Department of Industrial Relations.

It is important to note that if they do not hold their own workers compensation policy this could prohibit us from engaging their contract workers. If your client is based in California, it would be best practice to make sure that this requirement is outlined in your client terms.

Colorado

Paid Family and Medical Leave (FAMLI) – NICU Leave

Effective: January 1, 2026

Colorado’s FAMLI program adds up to 12 additional weeks of paid leave for employees whose infant is receiving inpatient care in a neonatal intensive care unit. This leave is separate from bonding leave and does not reduce other FAMLI entitlements.

Colorado Artificial Intelligence Act (CAIA)

Effective: June 30, 2026

Colorado enacted one of the most comprehensive AI laws in the US. Developers and deployers of high-risk AI systems used in employment decisions must prevent algorithmic discrimination and comply with extensive disclosure, reporting, and impact-assessment requirements.

Connecticut

Paid Sick Leave Expansion

Effective January 1, 2026

Connecticut’s paid sick leave law expands to employers with 11 or more employees in the state. Eligible employees may accrue and use up to 40 hours of paid sick leave per year.

Delaware

Paid Family and Medical Leave Insurance Program

Effective: January 1, 2026

Under the Healthy Delaware Families Act, eligible employees may take up to 12 weeks of paid family and medical leave, receiving up to 80% of wages (capped at $900 per week). Employers are responsible for funding the program, with contributions dependent on employer size.

Illinois

Chicago Paid Family and Medical Leave (FAMLI) – NICU Leave

Effective: June 1, 2026

The City of Chicago has issued revised rules, amending the city’s Paid Sick & Paid Leave law. This includes the expansion of the scope of permissible use of paid sick leave for childcare unavailability. The ordinance allows use of paid sick leave when an employee needs to care for a family member whose school, class, or “place of care” has been “closed.” Under the revised rules, a place of care can include non-institutional providers or informal arrangements, such as babysitters, family, or friends who supervise children while the employee is working, and that “closure” can include situations in which the childcare provider has an unscheduled closure.

The Impact to Your Supply Chain

The rules also expressly create joint employer liability, providing that multiple entities may be responsible with compliance under the City’s paid sick and paid leave laws, if the entities share control over the terms and conditions of employment. The rules reference professional employer organizations and temporary staffing agencies as examples, among others. Under the revised rules, more than one entity may be considered the “employer” of the covered employee; employees jointly employed by more than one employer must be counted for purposes of determining employer size and coverage thresholds.

Neonatal Intensive Care Leave Act

Effective: June 1, 2026

Beginning on June 1, 2026, eligible employees may take unpaid NICU leave while their child is receiving neonatal intensive care up to 10 or 20 days, depending on employer size. Leave is job-protected and health benefits must be maintained.

Paid Lactation Breaks

Effective: January 1, 2026

Illinois now requires employers with five or more employees to pay employees for lactation break time at the employee’s regular rate of pay. Previously, such breaks were required, but as unpaid time. Employees cannot be required to use paid leave for this purpose.

Restrictions on AI in Employment Decisions

Effective: January 1, 2026

Illinois amended its Human Rights Act to prohibit the use of AI that results in discrimination or uses proxies such as ZIP codes. Employers must also notify employees when AI is used in hiring, promotion, discipline, or other employment decisions.

Organ Donation Leave Expansion

Effective: January 1, 2026

Paid organ donation leave now applies to part-time employees, allowing up to 10 paid days in a 12-month period.

Neonatal Intensive Care Leave Act (NICLA)

Effective: June 1, 2026

Eligible employees may take unpaid NICU leave while their child is receiving neonatal intensive care—up to 10 or 20 days, depending on employer size. Leave is job-protected and health benefits must be maintained.

Maine

Pay Transparency

Effective: July 13, 2026

Effective July 13, 2026, employers with 10 or more employees must include the pay range in job postings, unless the job is based solely on commission. “Posting” means a solicitation that is intended to recruit employment applicants for a specific available position and that includes qualifications for desired applicants, including recruitment done directly by an employer or indirectly through a 3rd party.

Additionally, upon the request of an employee, an employer must disclose the range of pay the employer offers for the position the employee holds. The employer must maintain a record of each position held by an employee and the pay history of the employee in each position for the duration of the employee’s employment with the employer and for three years after the termination of the employee’s employment.

Paid Family and Medical Leave Program

Effective: May 1, 2026

Maine’s PFML benefits begin, allowing employees to take up to 12 weeks of paid leave per year for family or medical reasons. Payroll contributions began in 2025.

Maryland

Paid Family and Medical Leave Delay

Effective: Contributions delayed to January 1, 2027

Maryland delayed both employer and employee contributions and the availability of paid leave. Benefits will begin no earlier than January 1, 2027, and no later than January 1, 2028.

Baltimore – Pregnancy Accommodation Ordinance

Effective: January 10, 2026

Baltimore employers with 2 or more full-time employees must provide reasonable pregnancy-related accommodations and maintain a written pregnancy accommodation policy distributed to employees.

Minnesota

Paid Family and Medical Leave

Effective: January 1, 2026

Minnesota’s PFML program launches, offering eligible employees up to 20 weeks of paid family and medical leave per year. The premium rate is 0.88%, shared between employers and employees.

New Jersey

Family Leave Act

Effective: July 17, 2026

Effective July 17, 2026, employees will now be eligible to leave under the Family Leave Act if they have been employed for at least three months and 250 hours. Additionally, under the current regulations, the Act applies to employers with 30 or more employees worldwide. Under the amendments, employers with 15 or more employees will be covered beginning on July 17, 2026. Beginning July 17, 2027, employers with 10 or more employees would be covered. Finally, beginning July 17, 2028, employers with five or more employees would be covered.

Furthermore, the amendments create a job restoration requirement for paid leave under New Jersey’s Temporary Disability Insurance/Family Leave Insurance. Effective July 17, 2026, employees taking such paid leave must be reinstated to the same or an equivalent position upon return of leave. The amendments will also permit employees to choose whether to use paid sick leave or New Jersey’s Temporary Disability Insurance/Family Leave Insurance during a qualifying period of leave. Effective July 17, 2026, employees that are eligible for paid sick leave, temporary disability benefits, and/or family leave insurance benefits may choose whether to use the leave and in what order to take the leave. An employee may not receive two or more types of paid leave benefits at one time.

New York

New York LLC Transparency Act

Effective: January 1, 2026

Certain LLCs must report beneficial ownership information to the New York Department of State. Existing LLCs must file by December 31, 2026; newly formed LLCs must file within 30 days. Exempt LLCs must file an attestation of exemption with the same deadlines, on an annual basis.

NYC Earned Sick and Safe Time Act Amendments

Effective: February 22, 2026

NYC expanded permissible uses of sick and safe leave and now requires employers to provide 32 hours of unpaid sick or safe leave annually, in addition to paid entitlements.

NYC Paid Prenatal Personal Leave Requirements

Effective: June, 2025

As of June 2025, NYC’s regulations incorporated the state Paid Prenatal Personal Leave requirements into it’s regulations. The amendments formally adopt these requirements.

Oregon

Paid Sick Leave for Blood Donations

Effective: January 1, 2026

Oregon allows employees to use paid sick leave for blood donations made through approved or accredited programs.

Workplace Violence Prevention – Healthcare Employers

Effective: January 1, 2026

Healthcare employers must update workplace violence prevention plans and provide annual training to employees and contracted security staff.

Pennsylvania

Pittsburgh Paid Sick Leave Amendments

Effective: January 1, 2026

Accrual increases to 1 hour per 30 hours worked. Annual caps rise to 72 hours for employers with 15 or more employees and 48 hours for smaller employers.

Philadelphia Fair Criminal Record Screening Amendments

Effective: January 6, 2026

Philadelphia expanded “Ban the Box” protections, requiring provisional written decisions, detailed notices, and a 10-business-day response period before final adverse action.

CROWN Act Amendments

Effective: January 24, 2026

Pennsylvania now explicitly prohibits discrimination based on hair texture or protective hairstyles associated with race.

Tennessee

Non-Compete Restrictions

Effective: July 1, 2026

Effective July 1, 2026, employers in Tennessee may no longer enter into non-compete agreements with employees earning less than $70,000 annually. The new law further specifies that non-compete agreements for employees earning $70,000 or more per year are presumed reasonable if the time restraint is: two years or less for former employees and independent contractors; three years or less for distributors, dealers, franchisees, and similar business relationships; and the longer of five years or less, or the period during which payments are made to the seller in connection with a sale of a business or equity interest.

Virginia

Non-Compete Law

Effective: July 1, 2026

Effective July 1, 2026, Virginia’s non-compete prohibition will expand to all non-compete agreements entered into, amended, or renewed beginning on July 1, 2026, making such non-compete agreements unenforceable if an employer discharges the employee without providing severance benefits, unless the employee is discharged for cause. The law requires such severance benefits or other monetary payment to be disclosed upon execution of the non-compete agreement.

Pay Transparenct and Pay History

Effective: July 1, 2026

Effective July 1, 2026, Virginia has enacted new pay transparency and pay history requirements. Under the law, employers will be prohibited from seeking the wage or salary history of a prospective employee, and from relying on the wage or salary history of a prospective employee in considering the prospective employee for employment.

Additionally, the law will prohibit employers from (1) failing or refusing to disclose in each public and internal posting for each job, promotion, transfer, or other employment opportunity the wage, salary, or wage or salary range for the position; and (2) failing to set a wage or salary range in good faith. In determining whether the wage or salary range has been set in good faith, the breadth of such wage or salary range will be considered.

The law defines “wage or salary range” as the minimum and maximum wage or salary for the position, set in good faith by reference to any applicable pay scale, any previously determined wage or salary range for the position, the actual range of wages or salaries for persons currently holding equivalent positions, or the budgeted amount available for the position, as applicable.

Washington

Fair Chance Act Amendments

Effective: July 1, 2026

Washington State’s Fair Chance Act has been amended, effective July 1, 2026, for employers with 15 or more employees (and on January 1, 2027, for employers with fewer than 15 employees). The amended statute prohibits employers from: inquiring about an applicant’s criminal record before extending a conditional job offer; taking an adverse action against an applicant or employee based on their arrest record or juvenile conviction record; or  taking an adverse action against an applicant or employee based on their adult conviction record absent a legitimate business reason. The amendments also create additional obligations for employers during the adverse action process.

Leave and Accommodations for Hate Crime Victims

Effective: January 1, 2026

Washington expanded protected leave and safety accommodations to include victims of hate crimes, including those committed online.

Non-Compete Salary Threshold Increase

Effective: January 1, 2026

Non-compete agreements are unenforceable against employees earning less than $126,858.83 annually and contractors earning less than $317,147.09 annually.

Fair Chance Act Amendments

Effective: July 1, 2026 (large employers – 15+ employees); January 1, 2027 (all employers)

Washington further restricts criminal history inquiries, bans automatic disqualifiers, and limits adverse actions based on arrest or juvenile records.

Disclaimer: The information provided here does not, and is not intended to, constitute legal advice. Instead, the information and content available are for general informational purposes only.