If 2025 taught us anything, it’s that employment law never stops evolving—and the cost of falling behind keeps climbing.
From Michigan’s dramatic sick leave overhaul to the collapse of federal overtime changes, this year kept HR professionals scrambling to keep up. As we close out 2025 and look toward 2026, let’s review the major employment law changes that reshaped the HR landscape this year—and what they mean for your business moving forward.
Top 10 Employment Law Changes That Impacted HR in 2025
1. Michigan Earned Sick Time Act (ESTA) – The Game Changer
Effective: February 21, 2025
Michigan replaced its Paid Medical Leave Act with the far more expansive Earned Sick Time Act. Employers with 11+ employees now must provide up to 72 hours of paid sick leave annually (accruing at 1 hour per 30 hours worked). Small businesses with 10 or fewer employees must provide 40 hours starting October 1, 2025.
The Risk: Non-compliance can result in civil fines up to $1,000 per violation, plus back pay and damages.
Action Item: If you haven’t updated your sick leave policies yet, you’re already behind. Larger employers should have been tracking accruals since February 21. Small businesses—your deadline is October 1.
2. Federal Overtime Threshold – Blocked at the Buzzer
Court Decision: November 2024
The DOL’s rule that would have raised the overtime exemption threshold to $58,656 annually on January 1, 2025, was struck down by a federal court. The threshold reverted back to $35,568 annually ($684/week).
What This Means: If you reclassified employees or gave raises in anticipation of the new threshold, you need to decide whether to reverse those changes or maintain the higher salaries. Either way, document your decision carefully.
The Uncertainty: The new administration may revisit this rule. Stay alert for potential changes in 2026.
3. Pay Transparency Sweeps the Nation
New States in 2025: Illinois, Massachusetts, Minnesota, New Jersey, Vermont
By 2025, these five states joined the growing list of jurisdictions requiring employers to disclose salary ranges in job postings. If you’re hiring remotely into these states, you’re covered even if your business is located elsewhere.
The Catch: Posting unrealistic ranges like “$50,000 – $150,000” violates the spirit of these laws and may trigger investigations. Your ranges need to reflect actual compensation practices.
What’s Coming: Ten additional states are considering similar legislation for 2026.
4. Independent Contractor Rules Get Complicated
Effective: March 24, 2024 (still impacting employers in 2025)
The DOL implemented a six-factor test for classifying independent contractors under the FLSA, replacing the simpler two-factor Trump-era approach. The factors include:
- Opportunity for profit or loss
- Financial investment in the work
- Permanence of the relationship
- Degree of control
- Whether work is essential to your business
- Worker’s skill and initiative
The Risk: Misclassification can result in back wages, overtime, tax penalties, and FLSA violations. The stakes have never been higher.
5. EEOC Releases Comprehensive Harassment Guidelines
Issued: April 29, 2024
The EEOC published updated enforcement guidance featuring 77 specific fact patterns that constitute unlawful harassment. The guidelines expand protections to include harassment based on sexual orientation, gender identity, and pregnancy-related conditions.
What Changed: The guidance addresses modern workplace issues including virtual harassment, social media conduct, and situations involving remote work.
Action Item: Review your anti-harassment policies and training programs to ensure they align with the new guidance.
6. Supreme Court Ends “Chevron Deference”
Decision: Loper Bright Enterprises v. Raimondo (2024)
The Supreme Court rejected the longstanding “Chevron deference” doctrine, which required courts to defer to federal agency interpretations of ambiguous statutes.
What This Means for HR: Agency regulations (like those from the DOL, EEOC, and NLRB) will face more legal challenges. Expect more uncertainty and court battles over federal employment rules going forward.
The Bottom Line: Don’t assume federal agency guidance will stand. Work with legal counsel when implementing controversial federal regulations.
7. Job Transfers Can Be “Adverse Actions”
Supreme Court Decision: Muldrow v. City of St. Louis
The Supreme Court unanimously ruled that a job transfer can be an adverse employment action under Title VII—even if the employee maintains the same rank and pay—if the transfer results in loss of benefits, perks, or standing.
The Impact: This lowers the bar for discrimination claims related to transfers, reassignments, and lateral moves.
What You Need to Do: Document the business reasons for any transfers. Consider the full impact on the employee, not just their title and salary.
8. AI in Hiring – States Start Regulating
Colorado AI Act: Effective June 30, 2026
Colorado became the first state to comprehensively regulate AI in employment decisions, requiring employers using “high-risk” AI systems to exercise “reasonable care” to prevent algorithmic discrimination.
Illinois, California, and New Jersey have also amended anti-discrimination laws to address AI use in hiring and employment decisions.
The Trend: Expect more states to regulate AI in 2026. If you’re using AI tools for recruiting, screening, or performance management, you need to understand the bias risks.
9. Minimum Wage Increases Continue
Nearly 80% of jurisdictions at $15+ per hour
Many states, cities, and counties implemented minimum wage increases in 2025, with the vast majority setting rates at $15 or higher. Federal contract workers saw their minimum wage increase to $17.75/hour effective January 1, 2025.
Don’t Forget: Minimum wage increases often trigger ripple effects. Review your entire wage structure to maintain internal equity.
10. Paid Sick Leave Expansion Accelerates
New States in 2025: Alaska, Missouri (later repealed), Nebraska
The trend toward mandatory paid sick leave continued in 2025. Nebraska implemented new requirements on October 1. Connecticut expanded its law to cover employers with 25+ workers (growing to 11+ by 2026).
The Pattern: Paid leave mandates are becoming the norm, not the exception. If your state doesn’t have one yet, it may soon.
Michigan Employers: Special Considerations
ESTA Implementation Deadlines
- Large employers (11+ employees): Should have been compliant since February 21, 2025
- Small employers (10 or fewer employees): Deadline is October 1, 2025
Key ESTA Requirements:
- Written notice to all employees (within 30 days of February 21)
- Required workplace posters (English and Spanish)
- Policy documentation of accrual method (accrual vs. frontloading)
- Tracking systems for accrual, use, and carryover
Good News for Employers:
The amended ESTA eliminated the private right of action for employees and removed rebuttable presumptions of violations. All complaints must now go through the Michigan Department of Labor and Economic Opportunity.
How Employers Should Plan for 2026
The employment law landscape will continue evolving in 2026. Here’s how to prepare:
Audit Your Current Compliance Status
- Review all policies against 2025 law changes—don’t assume you’re caught up.
- Conduct a pay equity analysis before new pay transparency laws catch you off guard.
- Audit independent contractor classifications using the six-factor test.
- Check sick leave tracking to ensure Michigan employers are properly accruing and documenting time.
- Review job descriptions and FLSA classifications in light of the overtime threshold uncertainty.
Prepare for Continued Pay Transparency Expansion
- Update job posting templates to include salary ranges where required.
- Standardize your pay bands across roles and departments to avoid embarrassing discrepancies.
- Train hiring managers on discussing compensation during interviews.
- Monitor the 10 states considering new pay transparency laws in 2026.
Get Smart About AI Tools
- Inventory any AI or automated tools you use in recruiting, hiring, screening, or performance management.
- Understand the bias risks inherent in these tools.
- Document how you’re monitoring for discriminatory outcomes.
- Watch Colorado’s AI Act implementation (June 30, 2026) as a template for other states.
Strengthen Your Harassment Prevention
- Update anti-harassment policies to align with the EEOC’s 77 fact patterns.
- Conduct comprehensive training for all employees (not just managers).
- Address virtual harassment and social media in your policies.
- Create clear reporting mechanisms and ensure employees know how to use them.
Monitor Federal Policy Shifts
- Stay alert for overtime threshold changes.
- Watch for potential revisions to the independent contractor test.
- Track NLRB and DOL enforcement priorities as they may shift significantly.
- Don’t rely solely on agency guidance.
Build a Compliance Calendar for 2026
- Map out all key deadlines: posting requirements, notice obligations, training due dates.
- Schedule quarterly policy reviews to catch changes before they become problems.
- Plan annual compliance training for managers and HR staff.
- Set reminders for state-specific requirements if you operate in multiple jurisdictions.
Invest in HR Infrastructure
- Upgrade your HRIS or time-tracking systems to handle complex sick leave accruals.
- Implement centralized leave tracking if you operate in multiple states.
- Create standardized templates for job postings, offer letters, and classification decisions.
- Develop clear documentation practices for all employment decisions.
Partner with Experts When It Counts
- Conduct an HR compliance audit to identify gaps before regulators do.
- Work with HR consultants who understand your state’s specific requirements.
- Don’t wait until you’re facing a lawsuit or agency investigation to get help.
The Bottom Line
2025 proved that employment law compliance isn’t getting easier—it’s getting more complex, more expensive to ignore, and more heavily enforced.
The employers who thrive in 2026 won’t be the ones who react to problems after they arise. They’ll be the ones who:
- Audit their compliance proactively.
- Update policies before deadlines hit.
- Train their teams consistently.
- Document everything carefully.
- Partner with experts strategically.
Please note: One misclassified employee, one botched termination, one ignored sick leave request, or one pay equity lawsuit can cost tens of thousands—or hundreds of thousands—in legal fees, back pay, penalties, and damages.
Don’t wait until 2026 to get compliant with 2025’s changes.
Need Help Getting Compliant Before Year-End?
I’m offering a limited number of Year-End HR Compliance Audits in December.
This comprehensive audit includes: ✓ Review of all employment policies against 2025 law changes.
✓ FLSA classification and wage analysis.
✓ Sick leave compliance check (Michigan employers).
✓ Job description review for ADA/FLSA compliance.
✓ Written report with specific action items and risk assessment.
✓ 30-minute debrief call to discuss findings.
Don’t start 2026 with 2024’s compliance gaps.
Schedule your audit: Book a 20-minute discovery call
Questions? Email me at vanessa@experthumanresources, or call (810) 813-8732, or click here.
About Expert Human Resources, LLC
Vanessa Nelson, CLRL, is a Certified EEO Investigator and the Founder and President of Expert Human Resources, LLC. With 16 years of experience specializing in HR compliance audits, employment law, workplace investigations, and policy development, Vanessa helps Michigan employers avoid costly mistakes and reduce legal exposure.
Connect with me on LinkedIn: Vanessa’s LinkedIn Profile
