By Vanessa Nelson, CLRL – Expert Human Resources
2025 wasn’t just another year of minor compliance tweaks. It was a watershed moment for HR professionals across the country. From Michigan’s groundbreaking sick leave expansion to the DOL’s independent contractor crackdown (and subsequent reversal), the employment law landscape shifted dramatically—and employers who didn’t keep up are now paying the price.
If you’re wondering whether 2025’s regulatory changes actually transformed how HR operates, the answer is an unequivocal yes. Here’s what changed, how it impacted your HR function, and what you need to do about it.
#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.
How It Changed HR:
✓ New Accrual Tracking Systems Required – HR had to implement systems to track sick time at a rate of 1 hour per 30 hours worked (faster than the old 1:35 ratio)
✓ Carryover Complexity – Employers must allow carryover up to 72 hours (40 for small businesses), creating multi-year tracking requirements
✓ Broader Coverage – Unlike the PMLA, ESTA covers ALL employees (no exemptions for part-time, temporary, or FLSA-exempt workers)
✓ 120-Day Waiting Period – New hires can wait 120 days before using accrued time, but accrual begins on Day 1
✓ Notice and Documentation Rules – Employers can require up to 7 days’ advance notice for foreseeable leave and “reasonable documentation” for absences over 3 consecutive days
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, 2025.
#2: Independent Contractor Rules Get Complicated
Effective: March 11, 2024 (2024 Rule) | May 1, 2025 (DOL Reversal)
The DOL issued a new six-factor test in March 2024 making it significantly harder to classify workers as independent contractors. Then, in a dramatic reversal, the Trump administration announced in May 2025 that the DOL would no longer enforce the 2024 rule, reverting to the traditional “economic reality” test.
How It Changed HR:
✓ Whiplash Compliance – HR departments spent early 2025 reclassifying workers under the strict six-factor test, only to reverse course months later
✓ State Law Still Applies – Even though federal enforcement softened, states like California with ABC tests remain unchanged
✓ Documentation Became Critical – The uncertainty drove HR to document independent contractor relationships more thoroughly to defend classifications
✓ Ongoing Litigation Risk – The 2024 rule remains valid for private lawsuits, creating a dual-standard nightmare
The Risk: Misclassification can result in unpaid minimum wages, overtime, liquidated damages, and attorneys’ fees—regardless of which federal standard applies.
Action Item: Review all independent contractor relationships NOW. Use the economic reality test for federal compliance but check your state’s requirements. Document the six-factor analysis for every contractor relationship to defend against private lawsuits.
#3: Michigan Minimum Wage Jump (2025 Wage Law Changes)
Effective: February 21, 2025
On February 21, 2025, Michigan’s minimum wage jumped from $10.56 to $12.48 per hour. This is the largest single increase in recent years. The law also sets out further increases for 2026 and 2027, with the minimum wage reaching $15.00 per hour by January 1, 2027.
How It Changed HR:
✓ Payroll System Updates – Immediate wage adjustments required for all minimum wage employees.
✓ Tipped Employee Recalculations – Restaurants and service industries had to recalculate tip credit formulas.
✓ Budget Impact – Organizations with large hourly workforces faced unexpected payroll increases.
✓ Future Increases Likely – The ruling suggests continued minimum wage escalation in coming years.
The Risk: Paying below minimum wage results in back pay liability, penalties, and potential class action exposure.
Action Item: Verify all hourly employees are earning at least $12.48/hour.
#4: Pregnant Workers Fairness Act (PWFA) – 2025 Enforcement Surge
Effective: June 27, 2023 (Law) | June 18, 2024 (Final Regulations)
The PWFA requires employers with 15+ employees to provide reasonable accommodations for pregnancy, childbirth, or related medical conditions—unless it causes undue hardship. The EEOC began aggressive enforcement in 2025, and several states filed legal challenges over the rule’s broad definition of “related medical conditions.”
How It Changed HR:
✓ ADA-Style Interactive Process for Pregnancy – HR must now engage in the interactive accommodation process for pregnancy-related conditions that don’t qualify as ADA disabilities.
✓ Broader Accommodation Scope – Accommodations required for morning sickness, lactation, miscarriage, fertility treatments, and other conditions previously not covered.
✓ Documentation Requirements Changed – Employers should only request medical documentation when “reasonable under the circumstances”.
✓ Multi-Jurisdiction Complexity – Some states have preliminary injunctions limiting enforcement (Louisiana, Mississippi, North Dakota), creating compliance confusion.
✓ Six-Figure Settlement Risk – 2025 saw multiple six-figure PWFA settlements for denied accommodations.
The Risk: Violations result in EEOC charges, litigation, and damages similar to ADA claims—plus potential EPLI premium increases and reputational damage.
Action Item: Train managers on PWFA requirements immediately. Update accommodation request forms. Review all pregnancy-related accommodation denials from the past 3 years—employees have 3 years to file charges.
#5: Classification Crackdowns: 1099 vs. W-2
Ongoing Throughout 2025
While the federal DOL softened its stance mid-year, state agencies and the IRS increased misclassification enforcement in 2025. States are aggressively auditing employers, particularly in construction, healthcare, transportation, and gig economy sectors.
How It Changed HR:
✓ State Audits Intensified – Even with federal leniency, state unemployment and workers’ comp agencies ramped up audits.
✓ IRS Scrutiny Increased – The IRS continued using its separate 20-factor common law test regardless of DOL changes.
✓ Multi-State Complexity – Companies with workers in multiple states face different classification standards in each jurisdiction.
✓ Back Taxes and Penalties – Misclassification discoveries trigger immediate liability for unpaid payroll taxes, unemployment insurance, and workers’ compensation premiums.
The Risk: One misclassified worker can trigger an audit revealing systemic problems, resulting in hundreds of thousands in back taxes, penalties, and interest.
Action Item: Conduct a classification audit NOW before the state or IRS does it for you. Document the analysis for each contractor. Be especially careful in California, Massachusetts, and New Jersey (ABC test states).
#6: Workplace Safety & OSHA Enforcement Increases
Intensified Throughout 2025
OSHA increased inspections, fines, and enforcement after reopening following the 43-day government shutdown (October 1 – November 12, 2025). The agency placed increased emphasis on:
- Heat illness prevention.
- Workplace violence prevention.
- Recordkeeping compliance.
- Whistleblower protections.
How It Changed HR:
✓ Inspection Surge Post-Shutdown – OSHA made up for lost time with aggressive inspection scheduling in Q4 2025.
✓ Higher Penalty Amounts – Fines increased, with serious violations reaching $16,131 per violation and willful violations up to $161,323 per violation.
✓ Industry-Specific Targeting – Manufacturing, transportation, schools, and healthcare faced disproportionate scrutiny.
✓ Recordkeeping Audits – OSHA focused heavily on Form 300/300A compliance and reporting accuracy.
✓ Whistleblower Retaliation Cases – Increased investigation of employees who reported safety concerns.
The Risk: OSHA violations aren’t just expensive—they’re public record and can trigger additional liability, including worker’s compensation claims and personal injury lawsuits.
Action Item: Review your OSHA 300 logs for accuracy. Ensure incident reporting is current. Conduct safety training on heat illness and workplace violence. Update your whistleblower protection policy and train supervisors on retaliation prohibitions.
#7: Pay Transparency Accelerates Nationwide
Multiple State Effective Dates Throughout 2025
2025 saw explosive growth in pay transparency laws:
- Illinois (January 1, 2025): 15+ employees must disclose pay scale and benefits in job postings
- Minnesota (January 1, 2025): 30+ employees must include pay range and benefits description
- New Jersey (June 1, 2025): 10+ employees must disclose salary range in all postings
- Vermont (July 1, 2025): 5+ employees must provide salary disclosure
- Massachusetts Phase 2 (October 29, 2025): Enhanced disclosure requirements and EEO-1 reporting mandate
- Cleveland, Ohio (October 27, 2025): 15+ employees must include salary ranges
How It Changed HR:
✓ Job Posting Overhaul – HR had to revamp all job descriptions to include compliant salary ranges.
✓ Internal Equity Audits – Posting salaries publicly exposed pay disparities, forcing compensation reviews.
✓ Candidate Negotiations Changed – Salary discussions now start with posted ranges, reducing negotiation flexibility.
✓ Multi-State Complexity – Companies advertising remote positions must comply with every state where candidates might apply.
✓ Recordkeeping Expansion – Some states require maintaining documentation of how salary ranges were determined (3+ years).
The Risk: Non-compliance penalties range from $500 to $10,000 per violation depending on jurisdiction. Some laws allow private causes of action, opening employers to lawsuits.
Action Item: Review EVERY job posting (internal and external) for compliance. Create defensible salary ranges based on market data. Document your methodology. For remote positions, comply with the most restrictive state law where you accept applicants.
Did 2025 Change HR: The Bottom Line
YES, 2025 fundamentally changed HR operations:
- Compliance became more complex – Multiple overlapping federal, state, and local requirements created a maze of obligations.
- Proactive auditing became mandatory – Reactive HR is now legal Russian roulette.
- Documentation intensity increased – Every decision needs contemporaneous documentation.
- Training became non-negotiable – Managers need ongoing training on ESTA, PWFA, pay transparency, and classification.
- Technology investment could be required – It may be difficult for manual tracking systems to handle ESTA accruals, pay transparency, and multi-state compliance.
- Budget impact was significant – Between wage increases, new leave benefits, compliance costs, and potential penalties, HR budgets stretched.
- Strategic HR became essential – Compliance isn’t administrative anymore—it’s a business risk management function requiring executive-level attention.
The employers thriving in 2026 will be those who:
- Treated 2025’s changes as a wake-up call, not a one-time adjustment.
- Invested in HR systems and expertise.
- Conducted proactive compliance audits.
- Trained managers continuously.
- Documented everything systematically.
The employers struggling in 2026 will be those who:
- Believed that changes in federal enforcement mean HR compliance is softening (State laws are stricter than ever, and private lawsuits don’t care about politics).
- Assumed “it won’t happen to me”.
- Cut corners on compliance to save money.
- Failed to update policies and practices.
- Ignored state-level changes while focusing only on federal rules.
- Waited for an audit or lawsuit to force action.
What Should You Do Right Now?
Immediate Actions (Next 30 Days):
- ☐ Audit sick leave policies for ESTA compliance (Michigan employers).
- ☐ Review all independent contractor relationships.
- ☐ Verify minimum wage compliance for all hourly employees.
- ☐ Train managers on PWFA accommodation requirements.
- ☐ Update all job postings for pay transparency compliance.
- ☐ Review OSHA recordkeeping and safety training.
- ☐ Conduct classification audit (1099 vs. W-2).
Strategic Actions (Next 90 Days):
- ☐ Implement time-tracking system for ESTA accruals.
- ☐ Conduct comprehensive compensation equity audit.
- ☐ Document classification analysis for all contractors.
- ☐ Update employee handbook for all 2025 changes.
- ☐ Create manager training program on 2025 legal changes.
- ☐ Establish accommodation request tracking system.
- ☐ Review employment contracts for pay transparency conflicts.
Need Help?
2025 was overwhelming. 2026 doesn’t have to be.
Expert Human Resources specializes in helping businesses navigate complex compliance requirements.
✓ HR Compliance Audits
✓ Policy Development
✓ Manager Training
✓ Employee Handbook Updates
✓ Classification Audits
✓ ESTA Implementation Support
Don’t wait for an audit or lawsuit to force action.
Contact us
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About the Author: Vanessa Nelson, CLRL, is the Founder and President of Expert Human Resources, LLC, with 16+ years specializing in HR compliance, employment law, workplace investigations, and policy development. She is a Certified EEO Investigator for Federal Government agencies and published author of two HR compliance books.
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.
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