2025 Employment Law Developments and the 2026 Compliance Horizon

Throughout 2025, employers navigated a steady stream of statutory changes, regulatory shifts, and enforcement recalibrations at both the state and federal levels. In many jurisdictions, 2025 functioned less as a single moment of change and more as an implementation runway for requirements that will take effect in 2026. The summary below highlights key employment law developments from the past year and flags certain additional changes employers should be preparing to implement in the months ahead.

Paid Leave and Wage Laws

Paid leave and wage compliance were a central focus of state-level employment law activity in 2025, particularly in Michigan, Illinois, and New York City.

• Michigan revised its paid leave and wage framework through legislative amendments finalized in early 2025. The changes replaced the Paid Medical Leave Act with a revised Earned Sick Time Act, reset employer coverage thresholds, imposed new notice and posting obligations beginning February 21, 2025, expanded paid sick leave coverage to small employers effective October 1, 2025, and preserved a schedule of minimum wage and tipped wage increases continuing into 2026. More details are available in our client alerts here and here.
• Illinois enacted multiple leave-related changes in 2025 that significantly expand employee time-off rights, most of which take effect in 2026. These include paid leave under the Military Leave Act, effective August 2025, for employees participating in funeral honors details; a new requirement under the Nursing Mothers in the Workplace Act, effective January 1, 2026, for employers with 100 or more employees to provide paid, as-needed lactation breaks during the first year after childbirth; and a new Neonatal Intensive Care Leave Act, effective June 1, 2026, requiring unpaid, job-protected leave for employees with a child in a NICU, with leave duration based on employer size. Amendments effective January 1, 2026, also expand the Employee Blood and Organ Donation Leave Act to cover part-time employees. More details are available in our client alert here.
• New York City implemented a new paid prenatal leave requirement effective January 1, 2025, making it the first jurisdiction to mandate paid leave specifically for prenatal care. Covered employers must provide up to 20 hours of paid prenatal leave in a 52-week period for medical care related to pregnancy. The leave is available immediately to both full-time and part-time employees, is taken in hourly increments, and operates as a stand-alone entitlement that does not run concurrently with other leave benefits. As a result, New York City employers must track and administer prenatal leave separately from existing sick leave or PTO programs. More details are available in our client alert here.

Immigration, Employee Privacy, and Work Authorization Practices

Another significant 2025 theme involved the growing intersection between immigration compliance and employee privacy protections, particularly at the state level.

• Illinois and California expanded employee protections governing how employers may respond to work authorization issues and documentation discrepancies, particularly when information is received from third parties rather than through formal government processes. Illinois’s amendments, which took effect in 2025, restrict employers from taking adverse action based on non-governmental information and require defined notice and documentation procedures before employment decisions are made. California enacted similar protections in 2025, with new notice and recordkeeping obligations scheduled to take effect in early 2026, further limiting employer discretion in responding to work authorization concerns. Together, these laws limit immediate adverse action based on informal information, require advance employee notice, mandate structured response steps, and in some cases, provide employees an opportunity to respond, increasing procedural obligations and enforcement risk for employers that act too quickly or inconsistently. More details are available in our client alert here.

At the federal level, enforcement incentives shifted in ways that increase employer risk in this area.

• The U.S. Department of Justice expanded its Corporate Whistleblower Awards Pilot Program in 2025 to include immigration-related violations. This change creates a financial incentive for individuals to report alleged workplace immigration violations directly to the government, increasing the importance of internal compliance programs, consistent documentation, and clear escalation protocols. More details are available in our client alert here.

Federal Civil Rights and Affirmative Action Developments

Federal policy changes in 2025 altered the compliance landscape for employers, particularly federal contractors.

• Early in the year, executive action directed federal agencies to scale back enforcement of disparate impact theories under federal civil rights laws, without eliminating the doctrine itself. As a result, employers may see reduced federal agency enforcement in this area, but disparate impact claims remain viable in private litigation. More details are available in our client alert here.
• Federal contractors also faced a major change when an executive order rescinded long-standing affirmative action requirements under Executive Order 11246, fundamentally altering compliance obligations related to affirmative action plans and related reporting. While certain affirmative action obligations remain in place under other laws, this change significantly reduces compliance burdens for some federal contractors and requires reassessment of existing affirmative action programs. More details are available in our client alert here.

Labor Relations and NLRB Enforcement Direction

Labor policy developments in 2025 reflected a recalibration of enforcement priorities and litigation strategy at the National Labor Relations Board.

• In March 2025, the Acting General Counsel rescinded numerous prior General Counsel memoranda addressing topics such as electronic surveillance, non-compete agreements, severance provisions, and other common employment practices, signaling a meaningful shift in enforcement posture. More details are available in our client alert here.
• Later in the year, the NLRB announced changes to its approach to settlements and litigation, emphasizing increased flexibility and efficiency in resolving unfair labor practice disputes. More details are available in our client alert here.

Restrictive Covenants and Workforce Mobility

Restrictive covenant law continued to evolve across jurisdictions in 2025, reinforcing the challenges of maintaining uniform non-compete programs.

• Multiple states enacted or expanded restrictions on non-compete agreements, limiting enforceability based on factors such as employee compensation, job duties, or profession. More details are available in our client alert here.

Additional State Developments to Watch in 2026

In addition to the developments addressed above, employers should be monitoring several state law changes scheduled to take effect in 2026 that will further expand leave and wage obligations.

• California enacted multiple additional employment law changes effective January 1, 2026:
• The state minimum wage will increase to $16.90 per hour for all employers, regardless of size, raising the minimum salary threshold for exempt executive, administrative, and professional employees to $70,304 annually.
• California also expanded crime victim leave and permissible paid sick leave uses under AB 406, which broadens paid leave rights for employees who are victims of, or have family members who are victims of, specified crimes, including leave to appear in court, comply with subpoenas, serve on juries, or attend related judicial proceedings.
• SB 513 expands the definition of “personnel records” to include employee education and training records, requiring employers to retain detailed training documentation in personnel files.
• California also significantly expanded pay transparency and reporting obligations. SB 464 broadens pay data reporting requirements by increasing job categories from 10 to 23, requires demographic data to be stored separately from personnel records, and imposes mandatory per-employee penalties for noncompliance. SB 642 clarifies pay scale disclosure requirements, strengthens California’s Equal Pay Act by prohibiting pay disparities based on sex, adopts a three-year statute of limitations measured from the last violation, and permits recovery of up to six years of back pay.
• California further amended its WARN Act through SB 617, which expands the information employers must include in mass layoff, relocation, and closure notices, including workforce coordination details, CalFresh assistance disclosures and contact information, and a functioning employer email address and telephone number.
• Colorado will expand its Paid Family and Medical Leave Insurance (FAMLI) program effective January 1, 2026, to provide additional leave for parents whose children require inpatient neonatal intensive care, along with updated contribution rates set annually by the state.
• Connecticut will continue its phased expansion of paid sick leave coverage, extending the law to employers with 11 or more employees effective January 1, 2026.
• Delaware will move its Paid Family and Medical Leave program into the benefits phase effective January 1, 2026, requiring employers to ensure payroll deductions, plan coordination, and private plan approvals align with state requirements.
• Illinois will implement amendments to the Illinois Human Rights Act (“IHRA”) effective January 1, 2026, imposing new notice, anti-discrimination, and recordkeeping requirements for employers that use artificial intelligence (“AI”) in employment decisions. Covered employers must notify applicants and employees when AI is used to influence hiring, promotion, discipline, discharge, or other terms and conditions of employment, and may not use AI in a manner that results in workplace discrimination. Required notices must be included in employee handbooks, posted in conspicuous locations on any intranet or external website where workplace notices are customarily posted, and incorporated into job advertisements. Employers must also retain AI-related notices and records for at least four years.
• Minnesota will launch its statewide Paid Leave program effective January 1, 2026, providing up to 20 weeks of combined family and medical leave and requiring employer payroll contributions and coordination with existing leave policies.

Looking ahead to 2026, many of the changes enacted in 2025 will move from transition to enforcement across a broad range of employment law areas, including paid leave and wage compliance, immigration and employee privacy obligations, federal civil rights enforcement, labor relations, and restrictive covenant practices. As new programs launch and enforcement priorities continue to evolve, employers should use the coming months to review policies, payroll and leave administration systems, employment agreements, and manager practices to ensure readiness for these expanding and increasingly complex compliance requirements. For assistance, please contact one of Honigman’s Labor and Employment Attorneys here.