HR law updates heading into 2026 look different from what many employers prepared for a year ago. Three of the Biden-era rules that dominated compliance planning in 2024 — the overtime salary jump, the FTC’s non-compete ban, and the independent contractor rule — have been vacated by federal courts or are actively being rescinded. In their place, employers are operating under older federal standards while state legislatures push new requirements on pay transparency, non-competes, and AI hiring tools. The result is a compliance picture that leans more on state law and long-standing statutes than on recent federal rulemaking.
Overtime Salary Thresholds Are Back to 2019 Levels
The Department of Labor’s April 2024 final rule, which would have sharply raised salary thresholds for white-collar overtime exemptions, never fully took effect. On November 15, 2024, the U.S. District Court for the Eastern District of Texas vacated the rule nationwide, finding that the DOL had set salary levels so high that the FLSA’s duties test became irrelevant.1U.S. Department of Labor. Earnings Thresholds for the Executive, Administrative, and Professional Exemptions
Employers are back to the 2019 numbers. The standard salary level for exempt executive, administrative, and professional employees is $684 per week, or $35,568 per year. The highly compensated employee threshold is $107,432 per year.2U.S. Department of Labor. Overtime Pay Any salaried worker earning less than $684 per week must receive time-and-a-half for hours over 40 in a workweek, regardless of job title.3U.S. Department of Labor. Fact Sheet 17A: Exemption for Executive, Administrative, Professional, Computer and Outside Sales Employees Under the Fair Labor Standards Act The automatic-update mechanism that would have adjusted thresholds every three years went down with the rest of the rule. If your organization raised salaries in 2024 to comply, those raises don’t have to be reversed, but they aren’t legally required.
Misclassification exposure remains steep. Under the FLSA, employees can recover unpaid overtime plus an equal amount in liquidated damages, effectively doubling the liability, and courts can add attorney’s fees on top.4Office of the Law Revision Counsel. 29 USC 216 – Penalties A 2025 DOL policy shift limits the Wage and Hour Division’s own pre-litigation investigations to recovering unpaid wages, reserving liquidated damages for cases it takes to court. Private lawsuits still carry the full statutory remedy.
Independent Contractor Classification Is Being Rewritten Again
The DOL’s 2024 independent contractor rule is on its way out. In February 2026, the Department proposed rescinding it and replacing it with an analysis closer to the 2021 framework.5U.S. Department of Labor. US Department of Labor Proposes Rule Clarifying Employee Classification Until that rulemaking is finalized, the 2024 rule technically remains on the books, though enforcement priorities have shifted.
The current federal test still looks at six factors under a totality-of-the-circumstances approach: opportunity for profit or loss, investments on each side, permanence of the relationship, degree of control, whether the work is central to the employer’s business, and the level of specialized skill involved.6U.S. Department of Labor. Fact Sheet 13: Employment Relationship Under the Fair Labor Standards Act – Section: What Is the Economic Reality Test? A worker who is economically dependent on the hiring entity is an employee.
The IRS applies its own common-law test for payroll tax purposes, grouped into behavioral control, financial control, and the type of relationship.7Internal Revenue Service. Independent Contractor (Self-Employed) or Employee Getting classification wrong under either test exposes you to back pay, liquidated damages, and unpaid payroll taxes with penalties. Document your reasoning for every contractor relationship, and don’t assume the shifting federal winds reduce the underlying risk.
The Federal Non-Compete Ban Is Dead
The FTC’s attempt at a nationwide ban on non-compete agreements is over. The Commission’s April 2024 final rule, which would have prohibited employers from entering into non-competes with any worker and rendered most existing agreements unenforceable, was struck down by federal courts in Texas and Florida on the ground that the FTC lacked authority to issue it.8Federal Trade Commission. Noncompete Rule In September 2025, the Commission voted to dismiss its appeals and accede to the vacatur, effectively killing the rule.9Federal Trade Commission. Federal Trade Commission Files to Accede to Vacatur of Non-Compete Clause Rule
Enforceability is now entirely a state-by-state question. Four states ban non-competes outright, and more than 30 others impose restrictions such as minimum salary thresholds, maximum durations, or industry-specific carve-outs. The trend is toward tighter limits. Confirm any agreement complies with the law of each state where your workers are located, because federal preemption is not going to save an unenforceable clause.
Pay Transparency Is Now a State-Law Matter
Roughly eight states have enacted comprehensive pay transparency laws requiring employers to include a good-faith salary range in every job listing, and some also require disclosure of other compensation or benefits. These laws typically apply to any position that could be performed within the state, pulling remote roles into scope even when the employer is headquartered elsewhere.
Civil fines for non-compliance can reach several thousand dollars per violation. Employers posting the same job across multiple states often need to include salary ranges to satisfy the most restrictive jurisdiction. Keep documentation of how each range was determined; it’s the simplest defense if a posting is challenged.
AI Hiring Tools Carry Real Discrimination Risk
New York City’s Local Law 144 remains the most prescriptive regulation on automated hiring. Employers using an automated tool to screen or rank candidates must conduct annual independent bias audits, publish the results, and notify applicants that automated screening is being used.10NYC.gov. Automated Employment Decision Tools (AEDT)
At the federal level, the EEOC has stated that Title VII of the Civil Rights Act applies to AI-driven employment decisions the same way it applies to any other hiring practice. If a screening algorithm produces a disparate impact on a protected group, the employer can face discrimination liability even if the software came from a third-party vendor.11U.S. Equal Employment Opportunity Commission. Select Issues: Assessing Adverse Impact in Software, Algorithms, and Artificial Intelligence Used in Employment Selection Procedures Under Title VII of the Civil Rights Act of 1964 The four-fifths rule is the starting point: if a tool’s selection rate for one group is less than 80% of the rate for another, that generally triggers a disparate impact inquiry.
Buying an off-the-shelf tool does not shift the risk to the vendor. Request validation studies, run your own adverse impact analyses on the tool’s output, and keep records showing ongoing monitoring. If a less discriminatory alternative was available during development and wasn’t adopted, that fact alone can support liability.12U.S. Equal Employment Opportunity Commission. What is the EEOC’s Role in AI?
FMLA Coverage Has Not Changed
The Family and Medical Leave Act remains the primary federal law guaranteeing unpaid, job-protected leave. Covered employers include private companies with 50 or more employees working 20 or more weeks in the current or prior calendar year, all public agencies regardless of size, and public and private elementary and secondary schools.13U.S. Department of Labor. Fact Sheet 28: The Family and Medical Leave Act To qualify, an employee must have worked at least 12 months, logged at least 1,250 hours in that period, and work at a location where the employer has 50 or more employees within a 75-mile radius.
Eligible employees can take up to 12 workweeks of leave in a 12-month period for the birth or placement of a child, their own serious health condition, care for a spouse, child, or parent with a serious health condition, or qualifying military-related needs. Care for a servicemember with a serious injury or illness extends up to 26 workweeks.14U.S. Department of Labor. Fact Sheet 28F: Reasons That Workers May Take Leave Under the FMLA Federal FMLA leave is unpaid, but the employer must maintain group health benefits and restore the employee to the same or an equivalent position. A growing number of states layer paid family leave programs on top of the federal framework.
Pregnancy and Nursing Accommodations Have Sharper Teeth
The Pregnant Workers Fairness Act requires employers with 15 or more employees to provide reasonable accommodations for known limitations related to pregnancy, childbirth, or recovery, unless doing so would create an undue hardship.15U.S. Equal Employment Opportunity Commission. Pregnant Workers Fairness Act Accommodations can include more frequent breaks, temporary schedule changes, lighter duty, or permission to sit during shifts. Employers must engage in an interactive process rather than unilaterally denying a request.16U.S. Equal Employment Opportunity Commission. What You Should Know About the Pregnant Workers Fairness Act
The PUMP for Nursing Mothers Act requires reasonable break time for nursing employees to express milk for up to one year after a child’s birth, plus a space that is shielded from view, free from intrusion, and not a bathroom.17U.S. Department of Labor. FLSA Protections to Pump at Work Businesses with fewer than 50 employees may claim an undue hardship exemption, but the exception is fact-specific; small size alone does not automatically qualify.18U.S. Equal Employment Opportunity Commission. Time and Place to Pump at Work: Your Rights
Religious Accommodations Carry a Higher Bar for Refusal
Recent EEOC guidance raises what qualifies as an “undue hardship” justification for refusing a religious accommodation. The burden must be substantial in the overall context of the employer’s business, not merely an inconvenience. Relevant factors include actual costs, effects on workplace operations, and whether the accommodation would compromise safety or coworkers’ ability to do their jobs.19U.S. Equal Employment Opportunity Commission. Fact Sheet: Religious Accommodations in the Workplace
An employee doesn’t need specific language or a written request; they just need to make the employer aware of the conflict between a religious practice and a work rule. Coworker hostility toward religion and customer preferences against religious expression do not qualify as undue hardship. Scheduling difficulty and uniform aesthetics rarely do either.
I-9 Verification Still Carries Steep Penalties
Every U.S. employer must complete Form I-9 for each person hired, verifying identity and work authorization for citizens and noncitizens alike.20U.S. Citizenship and Immigration Services. I-9, Employment Eligibility Verification Employers participating in a DHS-authorized remote examination program can verify documents electronically.
Penalties compound quickly. Paperwork violations for improperly completed forms run from roughly $288 to $2,861 per form. Knowingly hiring or continuing to employ unauthorized workers carries fines starting around $716 per worker for a first offense and climbing past $28,000 per worker for third and subsequent offenses. These amounts are adjusted periodically for inflation. An audit can cover years of hiring records, so gaps in a company’s process multiply into serious exposure fast.
Filing Deadlines for Discrimination Claims
Missing a filing deadline can kill an otherwise valid claim. An employee who believes they experienced workplace discrimination or retaliation generally has 180 calendar days from the discriminatory act to file a charge with the EEOC. That extends to 300 days if a state or local agency enforces a law covering the same type of discrimination.21U.S. Equal Employment Opportunity Commission. Time Limits for Filing a Charge
A few situations follow different timelines. Federal employees must contact their agency’s EEO counselor within 45 days. Equal Pay Act claims have a two-year statute of limitations from the last discriminatory paycheck, extending to three years if the violation was willful. For ongoing harassment, the clock runs from the date of the last incident. Weekends and holidays count toward the total, but if the deadline falls on a non-business day, the employee has until the next business day to file.21U.S. Equal Employment Opportunity Commission. Time Limits for Filing a Charge