Legal Insights
Similar to many changes in administration, the 2025 labor and employment landscape was defined by fragmentation followed by realignment. Federal agency authority faced significant constitutional challenges, while states and cities accelerated their own legislation on pay transparency, paid leave, and hiring practices. This year-end update provides insight into the most consequential developments for employers, focusing on the National Labor Relations Board’s (NLRB) shifting authority, new standards for employer liability, heightened scrutiny of artificial intelligence (AI), and a wave of new state and local mandates. Employers with multijurisdictional footprints should address these changes to refine and update compliance roadmaps for 2026.
NLRB Authority and Leadership in Flux
A divided D.C. Circuit panel held in Wilcox v. Trump, et al., No. 25-5057 (D.C. Cir. Dec. 5, 2025) that statutory “for-cause” removal protections for NLRB members are unconstitutional because the Board exercises substantial executive power. The ruling deepens a circuit split on the scope of executive power over independent agencies, and its ultimate resolution is expected to be determined by the Supreme Court based on its conflict with other appellate readings of longstanding Supreme Court precedent on independent agencies. In practical terms, the D.C. Circuit’s decision heightens uncertainty about Board leadership stability and could accelerate policy swings with changes in administrations.
Two operational effects follow. First, without a confirmed quorum, the Board cannot issue decisions in unfair labor practice appeals, which can stall matters for extended periods. Second, even with a restored quorum, Article II disputes are poised for Supreme Court review, so further shifts remain likely. The Fifth Circuit’s decision in SpaceX v. NLRB allows employers in that circuit (specifically, Texas, Louisiana, and Mississippi) to seek to enjoin ongoing NLRB proceedings based on the alleged unconstitutionality of Board member and administrative law judge (ALJ) removal protections. This approach, which diverges from the harm-based standard followed in other circuits, creates a jurisdiction-dependent ability to “pause” Board enforcement. In contrast, other circuits require a showing of case-specific harm, meaning this ability to “pause” Board enforcement is largely limited to Texas, Louisiana, and Mississippi.
However, progress was made late in the year to restore the NLRB’s quorum. The Senate HELP Committee advanced the nominations of Scott Mayer and James Murphy for the vacant Board seats, and the Senate is expected to vote on their confirmations, along with Crystal Carey for General Counsel. If confirmed, Mayer and Murphy would restore a three-member quorum, enabling the Board to resume issuing decisions.
Evolving Standards for Employer Liability
The Sixth Circuit created yet another circuit split related to employer liability for third-party harassment in its Bivens v. Zep, Inc. decision. Departing from EEOC guidance and other circuits that use a negligence standard, the court held that an employer is liable for harassment of an employee by a client or customer only if the employer intended for the harassment to occur or was substantially certain that it would occur. This decision drastically raises the bar for plaintiffs in Kentucky, Michigan, Ohio, and Tennessee.
AI in Employment Draws Regulatory and Litigation Scrutiny
As is the case over a broad range of industries, the regulatory landscape for AI in the employment context became more complex. While the new administration rescinded prior executive orders and the EEOC removed technical assistance documents on AI bias, employer liability remains. The class-action lawsuit Mobley v. Workday, Inc., which alleges that an HR software vendor’s AI tools are discriminatory, highlights the risk for employers using third-party AI for hiring and other employment decisions. States like California, Colorado, and Illinois also moved forward with their own AI regulations, and the Executive Branch has directed (via Executive Order) the Commerce Department to analyze state-specific laws and identify “onerous” laws that conflict with the Executive Branch’s minimal intervention policy for potential challenge.
Of particular note are California and New York’s AI chatbot laws, which require additional safety measures for companies that utilize AI with varying degrees of human-like responsiveness. The laws require additional safety protocols to detect potential harm and notify users that they are interacting with AI on a recurring basis. For companies that have implemented internal AI systems with communication features, now is the time to verify any compliance hurdles for 2026.
New York City Mandates Pay-Data Reporting
On December 4, 2025, the city council overrode a mayoral veto and enacted laws requiring private employers with 200 or more employees in New York City to submit annual pay-data reports modeled on the former federal EEO-1 Component 2 (pay band) framework. A designated agency will use the aggregated data to conduct citywide pay-equity studies and publish recommendations for employers to address pay disparities. The law establishes a phased rollout. Within the first year, the mayor must designate a responsible agency; within the next year, that agency must publish a standardized reporting form; and within one year after publication of the same, covered employers must submit their first annual report. Civil penalties apply for noncompliance, and the city will publish the names of employers that fail to report.
Pay Transparency Laws Expand
- Columbus, Ohio, enacted an expansion to its pay equity framework in early November 2025 by adding salary range disclosure requirements in job postings, building on its prior salary history restrictions.
- Delaware passed a pay transparency law requiring employers with over 25 employees to include wage ranges and benefits descriptions in job postings. The law takes effect on June 30, 2027.
- Massachusetts’ expanded pay transparency law took effect on October 29, 2025, requiring employers with 25 or more employees in the state to include pay ranges in all internal and external job postings.
- New Jersey’s pay transparency law took effect on June 1, 2025, requiring employers with 10 or more employees to disclose salary ranges and a general description of benefits in all job postings.
- Vermont’s pay transparency law took effect on July 1, 2025, requiring employers with five or more employees to include compensation ranges in all job advertisements.
Paid Leave Requirements Grow
The paid leave landscape continued to expand throughout 2025. New York City expanded its Safe and Sick Leave law, and new statewide paid sick leave laws took effect in Alaska, Missouri, and Nebraska.
Year-End Compliance Checklist
- Many states and major localities have published new minimum wage rates taking effect on January 1, 2026. Multistate employers should confirm rate files, posting updates, and downstream effects on salary-threshold peg points, shift differentials, and collective bargaining agreements.
- For employers with a multistate presence, now is the time to review your state-by-state compliance, even in areas that previously have not aroused concern. For example, in Serebrennikov v. Proxet Group LLC, the United States District Court for the District of Massachusetts held that a remote employee based in Ukraine had standing to sue his Massachusetts-based employer under the Massachusetts Wage Act, which provides for extremely employee-favorable damages. The ruling emphasizes that the Massachusetts Wage Act can apply to employees located outside Massachusetts and that Massachusetts employers should be cognizant that such employment relationships may be covered by the Wage Act.
Conclusion
Employers operating across multiple jurisdictions indeed face an increasingly fragmented compliance environment, where circuit splits, emerging technologies, and expanding worker‑protection laws create both uncertainty and operational risk. As organizations prepare for 2026, it is essential to reassess compliance frameworks, monitor ongoing legal developments, and proactively address potential exposure. Businesses should work closely with their legal counsel to evaluate how these changes apply to their specific operations and to develop tailored strategies that support compliance and reduce risk moving forward.
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