New Labor Laws and Compliance Updates Effective January 2026

Several significant employment law changes take effect this month, requiring immediate action for compliance.

Minimum Wage Increases:

Many states are raising minimum wages on January 1, with rates reaching or exceeding $15/hour in places like Arizona, Colorado, Hawaii, Maine, Missouri, and Nebraska. California's statewide minimum rises to $16.90/hour.

As of January 2026, 19 states have increased their minimum wage effective January 1, 2026. These increases are typically tied to inflation adjustments, scheduled hikes from prior legislation or ballot measures, or a combination of both.

The affected states are:

• Arizona

• California

• Colorado

• Connecticut

• Hawaii

• Maine

• Michigan

• Minnesota

• Missouri

• Montana

• Nebraska

• New Jersey

• New York

• Ohio

• Rhode Island

• South Dakota

• Vermont

• Virginia

• Washington

Note that some states (such as New York) have regional variations within the state, and many cities or counties may have local minimum wages higher than the state rate.

Three additional states — Alaska, Florida, and Oregon — are scheduled to increase their minimum wages later in 2026 (not on January 1).

The federal minimum wage remains $7.25 per hour and has not changed.

Paid Family and Medical Leave Expansions:

New or expanded programs launch in states including Delaware, Maine, Minnesota, and others, with benefits starting in 2026. Employers must update policies, coordinate with private plans, and prepare for increased contributions or deductions.

As of January 2026, several U.S. states have enacted Paid Family and Medical Leave (PFML) programs that provide wage replacement for qualifying family or medical leaves. These programs vary in scope, funding, and implementation dates.

States with Active PFML Programs (Benefits Currently Available)

These states have fully operational programs paying benefits as of January 2026:

• California

• Colorado

• Connecticut

• Massachusetts

• New Jersey

• New York

• Oregon

• Rhode Island

• Washington

• District of Columbia (employer-funded)

States with New PFML Programs Launching Benefits in 2026These states are rolling out or expanding programs with benefits starting this year:

• Delaware — Benefits begin January 1, 2026 (contributions started in 2025).

• Minnesota — Benefits and contributions begin January 1, 2026.

• Maine — Benefits begin May 1, 2026 (contributions started in 2025).

States with PFML Programs in Development (Benefits Starting Later)

• Maryland — Contributions delayed to 2027; benefits expected in 2028.

States with Expansions or Amendments Effective in 2026Several existing programs have updates taking effect this year:

• Colorado → Additional 12 weeks for neonatal intensive care unit (NICU) cases.

• Washington → Expanded job protection rights.

• Vermont → Ongoing expansions from voluntary to broader coverage.

In total, 13 states plus the District of Columbia have mandated PFML programs enacted, with three (Delaware, Minnesota, and Maine) newly paying benefits in 2026. These programs generally offer 6–12 weeks (or more in combined cases) of partial wage replacement for bonding with a new child, caring for a seriously ill family member, or addressing one's own serious health condition. Funding typically comes from payroll contributions shared between employers and employees.

Note: Some states (e.g., Illinois) have paid sick leave but not comprehensive PFML. Multi-state employers should check specific requirements, as local variations may apply. For the latest details, consult official state resources.

Pay Transparency and Equity:

Stricter requirements in states like California (SB 642) mandate broader pay data reporting, longer statutes of limitations, and enhanced equity audits. Multi-state employers should align job postings and records accordingly. Adopt the strictest standard (e.g., California's good faith upon-hire estimate) for nationwide postings to simplify compliance, while allowing overrides for less restrictive states. Retain job titles, wage histories, job descriptions, and pay scales for at least 3 years (aligned with extended statute of limitations).

AI Regulations in Employment:

States continue to implement rules preventing bias in AI tools for hiring, promotions, and assessments. Inventory tools, ensure human oversight, and conduct bias testing. As of January 2026, several U.S. states have implemented or are implementing laws and regulations specifically aimed at preventing bias and algorithmic discrimination in AI tools used for employment decisions, such as hiring, promotions, performance assessments, and other consequential actions.

Key States with Active Regulations

• California

Regulations under the Fair Employment and Housing Act (effective October 2025) prohibit the use of automated-decision systems (including AI) that discriminate based on protected characteristics. Employers must consider bias testing in defenses to claims, retain related records for four years, and face expanded liability (including for vendors).

• Illinois

Amendments to the Illinois Human Rights Act (HB 3773, effective January 1, 2026) make it unlawful to use AI (including generative AI) that results in discrimination against protected classes in recruitment, hiring, promotions, or other employment decisions. It also bans using ZIP codes as proxies for protected classes and requires employers to notify employees/candidates when AI is used.

• Colorado

The Colorado Artificial Intelligence Act (delayed to June 30, 2026) regulates "high-risk" AI systems in employment as consequential decisions. It requires developers and deployers to use reasonable care to avoid algorithmic discrimination, conduct impact assessments, implement risk management policies, and provide notices/disclosures.

• Texas

The Texas Responsible Artificial Intelligence Governance Act (TRAIGA, effective January 1, 2026) prohibits intentional discrimination via AI in employment (and broader contexts), though it does not establish liability solely on disparate impact.

Local Jurisdiction

• New York City

Local Law 144 (enforced since July 2023) requires independent bias audits for automated employment decision tools used in hiring/promotions, public posting of audit summaries, and notices to candidates/employees.

Other states (e.g., Maryland for facial recognition in interviews) have narrower rules, and several have proposed but not yet enacted broader AI employment bias laws. Multi-state employers should inventory AI tools, conduct audits where required, provide notices, and monitor for updates, as enforcement and litigation risks are increasing.

Other Key Changes:

Restrictions on noncompetes (e.g., Montana for physicians), expanded personnel record access (e.g., California including training records), and new notice requirements (e.g., California's Workplace Know Your Rights Act). Key recent changes (effective in 2025 or early 2026):

• Montana → New amendments (effective January 1, 2026) clarify that non-compete prohibitions for licensed physicians do not apply to repayment obligations for loans, relocation costs, signing bonuses, education, or tuition.

  
  

• Wyoming → Significant restrictions (effective July 1, 2025): Non-competes are generally void except for limited cases (e.g., trade secrets protection, sale of business, or executive/management personnel and their professional staff).

  
  

• Virginia → Expansion (effective July 1, 2025): Ban on non-competes extended to all employees entitled to overtime under federal law (non-exempt workers), regardless of earnings.

Healthcare-Specific Restrictions (many effective in 2025):

Several states added or tightened limits on non-competes for physicians and other medical professionals, including:

• Arkansas (voids for physicians)

• Indiana

• Louisiana

• Maryland

• Oregon

• Pennsylvania

• Texas

• Utah

States with near-total bans (unchanged recently): California, Minnesota, North Dakota, Oklahoma.

No major new statewide bans or broad restrictions took effect exactly on January 1, 2026, beyond Montana's physician clarification. Multi-state employers should review agreements for compliance with these evolving rules, especially in healthcare and for non-exempt employees. Consult state-specific resources or legal counsel for the latest enforcement details.

HR teams should audit policies, update handbooks, and train managers promptly to avoid penalties. Contact us for more HR collaboration.