As 2026 opens, employers face a host of legal changes impacting pay practices, employee classification, leave policies, workplace protections, and technology use. Staying ahead of these changes can help avoid costly mistakes, ensure compliance, and allow leaders to focus on running their businesses. This article highlights key federal, state, and local legal updates for 2026, and provides guidance for employer preparation.
As you will see, a few states are frequently cited. Even if you do not operate in these jurisdictions, they are often trend setters across the country. Therefore, it may be important to note the trend and see if your state is starting to accept the theory, even before a new law is passed!
Paid and Unpaid Leave Expansion
States continue to expand beyond the federal Family and Medical Leave Act (FMLA) by adopting or expanding paid and unpaid family and medical leave programs. Under the federal FMLA, eligible employees are entitled to up to 12 weeks of unpaid, job‑protected leave for their own serious health condition, to care for a new child, or to support certain family members.
Beyond the federal baseline, numerous states and Washington, D.C. have their own family and medical leave laws that expand the reasons leave can be taken, who is eligible, or which family members employees may take leave to care for. These jurisdictions include California, Connecticut, Hawaii, Maine, New Jersey, Oregon, Rhode Island, Vermont, Wisconsin, and Washington, D.C.
At the same time, a growing number of jurisdictions have adopted mandatory paid family and medical leave programs that provide partial age replacement during covered leaves, and a few jurisdictions offer voluntary paid-leave insurance options for employers.
Several states and local jurisdictions are rolling out notable expansions that will require employers to revisit their policies and compliance practices in 2026:
- In Illinois, the new Neonatal Intensive Care Unit (NICU) Leave Act, effective June 1, 2026, will provide parents of newborns receiving care in a neonatal intensive care unit with up to ten days of unpaid, job-protected leave. While the leave is unpaid, employers must ensure job protection and coordination with existing leave entitlements.
- New York continues to expand leave protections, becoming the first state to require 20 hours of paid prenatal sick leave, separate from and in addition to existing sick-leave benefits. This new entitlement reflects a broader trend towards more tailored, condition-specific leave requirements.
- In California, paid leave benefits will increase through higher wage-replacement rates under both the Paid Family Leave (PFL) and State Disability Insurance (SDI) programs. These enhancements are designed to improve income continuity for employees taking qualifying leave and may increase administrative responsibilities for employers.
- Rhode Island has enacted comprehensive amendments to its Temporary Disability Insurance (TDI) and Temporary Caregiver Insurance (TCI) programs, effective January 1, 2026. The changes expand the definition of covered family members, add organ and bone-marrow donation as qualifying reasons for leave, and raise benefit and wage-based thresholds.
- At the local level, New York City has amended its Earned Safe and Sick Time Act (ESSTA), effective February 22, 2026. Employers will be required to make 32 hours of unpaid safe and sick time available immediately upon hire, and the amendments also broaden the list of qualifying reasons for which leave may be used.
Labor Relations
The National Labor Relations Board (NLRB) regained a quorum in December 2025, restoring its ability to issue decisions, advance rulemaking, and set enforcement priorities. On December 18, 2025, the U.S. Senate confirmed three nominees at the NLRB: James Murphy as Board Chair, Scott Mayer as a Board Member, and Crystal Carey as General Counsel. Carey’s confirmation provides leadership for enforcement, while Murphy’s and Mayer’s confirmations restore the Board’s statutory quorum, allowing it to resume normal operations.
Despite regaining a quorum, few immediate changes are expected. The Board customarily overturns prior precedent only with a three-member majority. Currently, the Board includes two members appointed by a Republican president and one Democratic appointee, David Prouty. Based on past practice, this split makes it unlikely the Board will revisit or overrule Biden-era precedent—however, given the current lack of deference to precedent, predictions are unreliable.
Employers should nevertheless anticipate increased NLRB activity and prior precedent ultimately falling.
Wage, Pay Equity, and Worker Protection Laws
Minimum Wage Increases
In 2026, 22 states will increase their minimum wage rates. Several states, including Arizona, Colorado, Hawaii, Maine, Missouri, and Nebraska, will see statewide minimums reach or exceed $15.00 per hour for the first time. Numerous local jurisdictions are also implementing increases. At the federal level, the minimum wage remains $7.25 per hour for non-tipped employees and $2.13 per hour for tipped employees, with a maximum tip credit of $5.12.
California Pay Equity
Effective January 1, 2026, SB 642 expands the definition of “wages” to include not only base compensation, but also benefits, bonuses, commissions, equity awards, and other forms of non-base compensation. The law also extends pay-equity protections to nonbinary employees and requires that employers post actual pay ranges, rather than placeholder ranges, in job postings. Additionally, the statute of limitations for pay-equity claims is extended to three years from the last date the cause of action occurs, increasing the potential window for employee claims.
California Wage Judgment Enforcement
Under SB 261, employers found liable for unpaid wages may now face penalties of up to three times the judgment amount, in addition to mandatory attorney’s fees. This change significantly raises the financial stakes for employers who fail to meet wage obligations and dramatically increases the incentive to file such actions.
Key California Cases Employers Should Watch in 2026
Several California Supreme Court cases may have significant implications for employers next year:
- Fuentes v. Empire Nissan, Inc.: This case examines whether arbitration agreements required as a condition of employment can be unenforceable due to unconscionability. Employers using mandatory arbitration policies should review agreement language and consent procedures to evaluate enforceability.
- Hern v. Pacific Gas & Electric Co.: The Court will clarify whether a terminated employee can bring a defamation claim against a former employer if the alleged statements contributed to their termination, or whether such claims must instead be pursued under wrongful discharge theory. This decision could affect risk exposure for employer communications regarding employee performance or termination.
- Leeper v. Shipt, Inc.: This case addresses whether all Labor Code Private Attorneys General Act (PAGA) actions must include both individual and non-individual claims, or if a plaintiff can bring a non-individual “headless PAGA” action alone. The issue is significant because PAGA has traditionally required the named plaintiff to have personally suffered at least one Labor Code violation, anchoring the case to a concrete individual injury. If the Court permits purely representative claims without an accompanying individual violation, the threshold for filing PAGA actions would be substantially lowered. Employers should monitor this case closely, as the outcome may influence litigation strategy and potential liability in PAGA claims.
Employers operating in California should track these decisions carefully. Reviewing internal policies, employment agreements, and compliance practices now can help mitigate risk once these cases are decided.
Layoffs, Closures, and Notice Requirements
California Cal-WARN Enhancements
Effective January 1, 2026, SB 617 updates California’s Worker Adjustment and Retraining Notification (Cal-WARN) requirements. Employers issuing layoff or closure notices must now provide additional information, including:
- Coordination with rapid response services;
- Contact details for workforce development boards; and
- Whether affected employees may be eligible for public-assistance benefits.
California Workplace “Know Your Rights” Act
Under this law, employers are required to provide annual written notice of key labor rights, covering topics such as workers’ compensation, immigration-related protections, and rights during interactions with law enforcement. The first notice must be delivered by February 1, 2026, with annual updates thereafter.
COVID-Era Recall and Retention Rules
Certain California rehire and recall protections implemented during the COVID-19 pandemic have been extended through 2027, ensuring continued job protection for employees affected by prior workforce COVID-related reductions.
Hiring, Background Checks, and Screening Restrictions
Philadelphia has updated its background-check ordinances, placing stricter limits on how far back employers may consider certain criminal convictions during the hiring process. These changes are part of a broader trend in cities and states aimed to reduce barriers to employment while balancing workplace safety considerations. Employers in Philadelphia should review and update their hiring policies and screening practices to ensure compliance with the new restrictions.
Meal and Rest Break Requirements
Several states are considering or adopting new rules that expand employee break rights. Key developments include:
- Requiring paid rest breaks every four hours worked, including in jurisdictions where rest breaks are currently unpaid, waivable, or not expressly mandated; and
- Mandating fully uninterrupted, unpaid meal breaks for longer shifts, eliminating “on-duty,” delayed, or interruptible meal periods that are presently permitted in some jurisdictions.
Employers should monitor these evolving requirements, as they may affect scheduling, payroll practices, and compliance obligations for hourly employees.
Non-Compete Agreements
The FTC’s proposed nationwide ban on non-compete agreements was struck down, leaving the tremendously varied state-by-state framework as the guide for employers heading into 2026. Employers should continue to review and update their non-compete policies based on the laws of each jurisdiction in which they operate, as requirements and enforceability vary widely across states.
Artificial Intelligence in Employment
The use of artificial intelligence (AI) in hiring, performance evaluations, promotions, compensation, and terminations continues to expand, raising concerns about algorithmic bias and discrimination. The EEOC has already taken enforcement action, with the first AI-related discrimination case settled in 2023.
As this use of AI continues to grow, regulators are introducing new rules and strengthening existing frameworks to address discrimination and bias risks:
- Colorado AI Act (effective June 30, 2026): This law targets “high-risk” AI systems used in hiring, employee evaluations, and other critical employment processes. Employers will be required to disclose AI usage, assess potential discriminatory or harmful outcomes, implement mitigation measures, and document efforts to ensure fairness, including conducting regular audits.
- New York City updates to Local Law 144: Building on existing transparency requirements, NYC is expected to expand reporting obligations and oversight for AI used in recruitment, promotions, and other employment decisions.
- California AI and employment data rules: While earlier regulations under the state law set baseline requirements for employee data and AI transparency, 2026 is likely to bring additional obligations, including stronger rules around recordkeeping, algorithmic accountability, and disclosures to applicants and employees.
- Maryland and Illinois expansions: Both states are enhancing protections around automated decision-making and facial recognition. Maryland is expected to tighten restrictions on AI-driven employment tools, and Illinois is likely to strengthen consent and disclosure requirements under the AI Video Interview Act and the Illinois Human Rights Act to address bias and privacy risks.
Employers should prepare now for heightened transparency, accountability, and audit obligations, as AI regulations across states are expected to increase in both scope and enforcement rigor in 2026. Early policy reviews and compliance planning can reduce legal risk and ensure fair and equitable use of AI tools in the workplace.
Workplace Discrimination
The EEOC has signaled increased attention to potential claims of reverse discrimination, including cases involving white male employees. This will expand the agency’s focus beyond traditionally protected groups, and underscores the importance of fair, consistent, and well-documented workplace policies. Maintaining clear records of hiring, promotion, compensation, and termination decisions, as well as ensuring that all employment practices are applied uniformly, will help organizations manage risk as enforcement priorities evolve. This is especially important for organizations which are continuing the use of DEI programs created under the last Administration.
In addition, Philadelphia has introduced new protections under its Fair Practices Ordinance (PFPO). As of November 20, 2025, the City Council amended the PFPO to prohibit discrimination based on menstruation, perimenopause, and menopause. Beginning January 1, 2027, employers in Philadelphia will be required to provide reasonable accommodations for employees whose symptoms substantially interfere with their ability to perform one or more job functions, unless doing so would impose an undue hardship.
Because menstruation, perimenopause, and menopause are not explicitly recognized as protected classes under Pennsylvania or federal law, these requirements represent unique obligations for employers. While Rhode Island passed a law in June 2025 requiring accommodations for menopause-related medical conditions, Philadelphia is the first major U.S. city to extend protections to menstruation, perimenopause, and menopause specifically. Employers operating in Philadelphia should review and update their policies to reflect these new obligations and ensure compliance when accommodating affected employees.
Marijuana and Controlled Substances
A recent executive order directs the Department of Justice (DOJ) to complete the rulemaking process to reschedule marijuana from a Schedule I to a Schedule III controlled substance. Since 1970, marijuana has been classified as Schedule I, meaning it is considered to have no currently accepted medical use and a high potential for abuse. Schedule III drugs are viewed as having a moderate to low potential for physical and psychological dependence.
Until the DOJ officially reschedules marijuana, employers’ obligations regarding drug testing, workplace policies, and accommodations remain unchanged. This is particularly important because:
- Employees may seek marijuana use as a reasonable accommodation under the Americans With Disabilities Act (ADA). Courts have previously rejected such claims at the federal level, but state or local laws may apply which adds complexity to compliance.
- Employers conducting drug testing, including those subject to Department of Transportation (DOT) regulations, should continue standard practices until federal rescheduling occurs.
- The eventual rescheduling may raise questions for employers regarding enforcement of substance abuse policies, accommodation requests, and compliance with state or local marijuana laws.
Employers should monitor developments closely and review policies proactively to prepare for potential changes in federal enforcement and employee accommodation obligations.
Conclusion
The new year brings a complex array of employment law changes at the federal, state, and local levels. Employers should review and update policies for all topics discussed. Proactive planning, thorough documentation, and attention to jurisdiction-specific requirements will be essential for minimizing risk and ensuring compliance in the year ahead.
Brody and Associates regularly advises management on compliance with the latest local, state and federal employment laws. If we can be of assistance in this area, please contact us at info@brodyandassociates.com or 203.454.0560.
