2026 Employment Law Developments: Key Takeaways for Employers
December 22, 2025 | US Law Updates
Article by: Eileen Letts and Radhi Shah
We would like to bring to your attention several significant developments to employment laws for 2026. We strongly recommend reviewing these new laws and updating your employment policies accordingly. Should you have any questions or require assistance with policy updates, please feel free to reach out.
Paid Leave Developments
Many states continue to build on the federal Family and Medical Leave Act by adopting or expanding paid family and medical leave programs. Fourteen jurisdictions now operate mandatory programs funded through payroll contributions, while ten states offer voluntary paid leave insurance options that employers may choose to adopt. In addition, several new state specific leave laws will apply in 2026. For example, Illinois will require job protected leave for parents whose newborns require care in a neonatal intensive care unit, and New York has introduced paid time specifically designated for prenatal medical appointments. California has also increased wage replacement levels available under its family and disability insurance programs. Employers with workers in more than one state should verify each state’s rules and confirm that handbooks, benefit materials, and payroll systems reflect these changes.
Federal Arbitration Act Case to Watch
The United States Supreme Court is reviewing a case that could reshape the scope of the Federal Arbitration Act. The question before the Court is whether local delivery drivers who work entirely within one state may still fall outside the Act if their deliveries are part of a larger interstate distribution process. The outcome could affect whether certain arbitration agreements with intrastate delivery workers remain enforceable under federal law. Employers that rely on arbitration programs should monitor the decision and evaluate whether revisions to their agreements may be necessary.
Artificial Intelligence in Employment
More states and cities are adopting rules directed at the use of automated tools in hiring, promotion, and other employment decisions. Requirements vary, but commonly include disclosures to applicants, consent for certain types of analysis, bias testing, recordkeeping, and public reporting. In 2026, new obligations will take effect under the Colorado AI Act and revised provisions of the Illinois Human Rights Act, both of which impose detailed duties on organizations that use or develop AI systems for employment purposes. Other jurisdictions, including California, New York City, Maryland, and Illinois, have additional requirements that may apply depending on the specific technology used. Employers should review all automated screening or decision making tools, confirm whether they trigger state specific obligations, and ensure that internal processes allow for documentation, oversight, and timely employee notices.
What Employers Should Prepare for in 2026
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Anticipate continued activity from the Equal Employment Opportunity Commission, including additional guidance and enforcement in areas involving new technologies and discrimination risks.
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Review the structure and scope of noncompete agreements to ensure they remain consistent with evolving state level restrictions.
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Expect additional states to advance pay transparency laws and prepare to standardize compensation related disclosures across jurisdictions where feasible.
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Examine the use of AI and automated decision tools within your organization, and develop processes for audits, disclosures, and recordkeeping as required by new and emerging laws.
We strongly recommend reviewing these new laws and updating your employment policies accordingly. Should you have any questions or require assistance with policy updates, please feel free to reach out.
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