Top Labor and HR Compliance Issues for 2026

This year labor and human resources compliance professionals should expect increased state-level enforcement activity—particularly in Democrat-led states—on a variety of employment-related issues, according to Elias Kahn, senior product manager for labor and employment, tax, employee benefits and executive compensation for the Practical Guidance team at LexisNexis®.

We asked Kahn, a frequent contributor to the State Net® Capitol Journal™, to outline what he believes will be the top employment issues in 2026.

In addition to artificial intelligence—the top issue for state lawmakers right now—Kahn identified the federal government’s change of priorities regarding the workplace and blue states’ response as a major labor and HR theme for the new year.

“Employers need to be aware of this dynamic and be prepared,” he said.

2025 Busy Year for AI in Employment

Last year at least 33 states considered bills dealing with the use of artificial intelligence in employment, according to analysis by the National Conference of State Legislatures. Twelve of those states enacted such measures.

AI Biggest Employment Issue

Kahn labeled AI as easily the hottest topic in employment in 2026. Despite President Trump’s executive order attempting to nullify state-level actions on AI, Kahn said he expects state legislatures to pursue more laws regulating the use of AI in hiring and HR. (See Artificial Intelligence State Law Survey.)

He also expects more litigation in 2026 over the technology’s use in connection with employment decisions, employee privacy, resume filtering, analysis of applicants’ faces and body language during job interviews and other workforce issues. (See Artificial Intelligence in the Workplace: Best Practices.)

Kahn said AI bias is sure to be a top priority for both legislators and lawyers in the coming year, meaning employers should be careful to audit any AI tools they use to help them make hiring, promoting, or firing decisions. (See AI and DEI & Employment Discrimination: Key Legal Issues and Potential Pitfalls & Benefits.)

“If you’re using AI tools in your employment decisions and you’re not auditing them, employees are almost certainly going to use that against you,” he said.

“There’s a bunch of things that I think are going to be big,” he said. “Not surprisingly, at the top of the list is artificial intelligence.”

Shift of Focus at EEOC

There have been major policy shifts on employment discrimination under the Trump administration.

Where the Equal Employment Opportunity Commission (EEOC) once focused most of its enforcement actions against employers that discriminated against minorities, the EEOC is now actively soliciting cases involving discrimination against white men, according to a report last month from NBC News.

Kahn expects that the example set by the Trump administration will lead to more employees filing reverse discrimination claims and private lawsuits alleging unfair treatment to majority groups. That includes employees or job applicants who claim they were discriminated against because they’re American and not foreign born.

The EEOC, along with the Department of Justice, is also targeting discrimination related to diversity, equity, and inclusion or DEI in the workplace through enforcement of Title VII of the Civil Rights Act of 1964, which historically was used to protect the same marginalized groups DEI policies are intended to help.

In addition, President Trump deprioritized federal enforcement of one category of discrimination cases by signing an executive order in April making it “the policy of the United States to eliminate the use of disparate-impact liability in all contexts to the maximum degree possible.”

Disparate-impact cases target seemingly neutral policies or practices that disproportionately harm people based on protected characteristics such as race, national origin, sex, or religion. (See Disparate Impact Claims: Key Considerations.)

The rationale for the new policy on such cases, according to the executive order, is that disparate-impact liability “holds that a near insurmountable presumption of unlawful discrimination exists where there are any differences in outcomes in certain circumstances among different races, sexes, or similar groups, even if there is no facially discriminatory policy or practice or discriminatory intent involved, and even if everyone has an equal opportunity to succeed.” The order goes on to say: “Disparate-impact liability all but requires individuals and businesses to consider race and engage in racial balancing to avoid potentially crippling legal liability. It not only undermines our national values, but also runs contrary to equal protection under the law and, therefore, violates our Constitution.”

Under the president’s directive, the federal government will presumably now prioritize disparate treatment cases, in which people are intentionally harmed based on their protected characteristics, over disparate-impact cases, even though both have been outlawed across the country.

As Kahn said, however, those laws won’t go away simply because the president doesn’t want to enforce them. They’re still on the books. And Kahn said employers should be prepared for employees and state-level regulators, particularly in blue states, to continue bringing disparate impact discrimination actions. Kahn also noted that some states, such as New York and New Jersey, have recently codified the right to bring disparate treatment actions in response to the federal government’s refusal to enforce discrimination actions based on disparate impact theories.

Wage and Hour Trends

Similarly, Kahn said he expects blue states to pick up the slack for the U.S. Department of Labor, which has seen a reduction in its Wage and Hour investigators who enforce minimum wage and overtime requirements, among other laws. (See DOL Wage and Hour Investigations: Peparation and Response.)

Under President Trump, the Department of Labor reinstituted the employer-favorable Payroll Audit Independent Determination or PAID program, which was established in the president’s first term but ended under President Joe Biden. The PAID program allows employers to resolve potential federal minimum wage or overtime violations by self-reporting problems found by internal audits and proactively settling with the department. (See Settlements and Resolutions of FLSA Claims and Potential FLSA Violations.)

The PAID program, which originally covered only violations of the Fair Labor Standards Act (FLSA), is being expanded in President Trump’s second term to include some violations under the Family and Medical Leave Act (FMLA) as well.

The popularity of the PAID program may help explain why assessments for back pay and penalties by the Labor Department surged 33 percent in fiscal year 2025, to $318 million, despite a drop in the Wage and Hour Division’s workforce.

Under President Trump, however, the Wage and Hour Division has curtailed efforts to seek liquidated damages, double damages that are compensation to employees for delayed payment of wages owed to them. This is a business-friendly change, Kahn said.

While the federal government has been reducing wage and hour enforcement, states, and particularly blue states, have continued to pass employee-friendly pay transparency and equal pay laws. Kahn said he expects to see more pay equity lawsuits in 2026 based on these state pay disclosure and equal pay laws because these suits have recently been so successful for litigants. (See Pay Transparency and Disclosure Requirements Compliance Checklist and Pay Transparency Legislation Tracker.)

Immigration Issues

On the immigration front, Kahn advised that employers be prepared for Immigration and Customs Enforcement or ICE raids at workplaces, which have increased under the Trump administration and that he doesn’t expect to end any time soon. (See Employer Guidance: Responding to ICE Raids.)

Kahn stated employers should expect more Form I-9 audits from the Trump Administration as well. (See I-9 Investigations by Government Agencies.)

Kahn also said employers should be aware of developments on H-1B visas, which will now not only carry a $100,000 fee under new Department of Homeland Security rules, but will be selected through a new weighted process that favors foreign workers with the highest wage offers instead of a random lottery as in the past.

Mamdani’s Non-Compete Ban Proposal

Kahn also said he’s intrigued by New York City Mayor Zohran Mamdani’s push for a city ban on noncompete agreements, which he believes would be the first in the nation at the municipal level.

There are only 10 local non-compete ordinances in the LexisNexis® State Net® local ordinance database, all associated with the New York City area. Six non-compete bills are also pending in Missouri, New Hampshire and Utah, according to the State Net legislative database. (See Non-competes and Trade Secret Protection State Practice Notes Chart.)

—By SNCJ Correspondent BRIAN JOSEPH

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