United States: Employment – 2026 Mid-Year Updates

Stay-or-Pay Provisions

Several states have enacted or expanded laws restricting employer-imposed repayment obligations, often referred to as “stay-or-pay” provisions. These provisions typically require employees to repay their employers certain amounts—such as training costs, sign-on bonuses, and relocation costs—upon or as a result of the termination of the employment relationship.  

As described in more detail in our March Legal Update, California’s law is one of the most stringent for employers. Applying to employment agreements executed after January 1, 2026, the law broadly prohibits requiring workers to repay training costs, educational expenses, or other employment-related costs upon separation. Limited exceptions exist for transferable-credential tuition programs, approved apprenticeships, and carefully structured bonus or relocation agreements meeting statutory conditions. In California, most traditional “stay-or-pay” arrangements are now void.  

Effective October 1, 2026, Connecticut will expand existing “stay-or-pay” prohibitions to employers of all sizes. Agreements requiring repayment for leaving before a specified date are generally invalid, subject to limited exceptions: agreements requiring repayment of advances, payment for property sold or leased to the employee, educational personnel sabbatical leave terms, and programs in collective bargaining agreements are not affected.

As discussed in our February Legal Update, New York’s Trapped at Work Act takes effect on February 13, 2027. The Trapped at Work Act declares unenforceable “employment promissory notes”—i.e., any instruments, agreements, or contractual provisions requiring repayment of a sum of money to an employer if the employment relationship ends before a specific time. Exceptions exist for transferable credentials and certain bonuses, relocation assistance, and non-educational incentives under specified conditions.

Employers with operations in California, Connecticut, and/or New York should immediately review existing training repayment agreement provisions (TRAPs), sign-on bonus clawbacks, relocation cost recovery provisions, and similar arrangements to see if any exceptions apply. Otherwise, TRAPs and “stay-or-pay” provisions should be restructured or discontinued unless a statutory exception applies. Employers should consider alternative employee retention mechanisms such as deferred compensation and employee stock options.

Paid Leave

State paid family and medical leave (PFML) programs continue to expand, with several new programs becoming operational in 2026. As of January 1, 2026, Connecticut’s paid sick leave law applies to employers with 11 or more employees. Covered Connecticut employers must provide paid sick leave to all non-seasonal employees, with coverage expected to expand to employers with at least one employee on January 1, 2027. 

Colorado illustrates how states are continuing to enhance existing PFML programs by adding targeted benefit expansions. Previously, Colorado’s Family and Medical Leave Insurance generally provided employees with up to twelve weeks of paid leave for qualifying reasons, with additional leave available for certain pregnancy or childbirth complications. Effective January 1, 2026, Colorado added up to 12 additional weeks of paid Neonatal Care Leave for parents or newborns receiving inpatient NICU care, separate from the existing bonding leave entitlement.

In addition to states’ enhancement of PFML programs, three states—Delaware, Minnesota, and Maine—launched entirely new paid family leave programs for private sector employers in 2026. With these new programs, a total of 13 states––California, Colorado, Connecticut, Delaware, Maine, Massachusetts, Maryland, Minnesota, New Jersey, New York, Oregon, Rhode Island, and Washington—plus the District of Columbia have enacted PFML programs.

Effective January 1, 2026, Delaware’s paid leave program provides that an employer’s paid leave obligations vary by employer size. For example, an employer with fewer than 10 employees is not required to provide any PFML coverage. An employer with 10 to 24 employees is only required to provide parental leave. Employers with 25 or more employees are required to provide their employees with full PFML coverage, which includes medical, family caregiving, and parental leave. Delaware employers must either opt into the state program or implement a state-approved private plan. Requiring PTO exhaustion prior to providing paid leave is prohibited.

Minnesota’s PFML program became effective on January 1, 2026 and provides that employees may take up to 12 weeks of medical leave and up to 12 weeks of family leave, with a combined cap of 20 weeks per benefit year. All private employers, regardless of industry or size, are covered under the act. 

Maine’s new PFML program became effective on May 1, 2026. Maine’s program provides up to 12 weeks of paid leave for family, medical, military exigency, service member, and safe leave (for victims of abuse or violence). Employers with fewer than 15 employees are exempt from the employer contribution requirement, though employee contributions may still apply, and private plan alternatives are available. Requiring PTO exhaustion for paid leave is prohibited.

Several other states have mandated family leave programs that are set to become effective in the coming years. In Maryland, payroll contributions for its long-delayed Paid Family and Medical Leave Insurance (FAMLI) program will begin on January 1, 2027, with benefits starting in January 2028. Virginia recently enacted a mandatory program that will begin collecting payroll contributions and distributing benefits in 2028. Hawaii and Pennsylvania both have proposed bills mandating paid family leave that, if passed, would start collecting contributions in 2028.

With three new state PFML programs now active and other states launching PFML programs in the next few years, employers should review payroll systems, update leave policies to reflect state-specific requirements, and notify employees. Key compliance points include determining whether to participate in state programs or implement approved private plans, ensuring that PTO-exhaustion rules are not imposed where prohibited, and ensuring timely payroll contributions are submitted.

Pay Transparency

Several states enacted new pay transparency laws in the first half of 2026, while others strengthened enforcement of existing requirements. The new laws and amendments increasingly require employers to disclose salary ranges and to ensure that those ranges are realistic, internally supportable, and coordinated with promotion, transfer, and third-party recruiting processes. For employers operating across multiple jurisdictions, compliance requires attention to salary range disclosures, salary history bans, and recordkeeping obligations.

In Virginia, new pay transparency requirements took effect on July 1, 2026. The Virginia law requires wage or salary ranges in public and internal postings and prohibits employers from seeking prospective employees’ wage or salary history. Employers are subject to private lawsuits and fines for violations. Effective July 29, 2026, a Maine law will require employers of 10 or more employees to include pay ranges in job postings. Maine’s law also requires that employers disclose pay ranges to current employees upon request and keep record of pay histories. There is no private right of action, and enforcement lies with the Maine Department of Labor. In September 2027, Delaware’s pay transparency law will require employers with more than 25 employees to disclose compensation range and benefit descriptions in job postings.

California amended its pay transparency law to define “pay scale” as a “good faith estimate” of the salary or hourly range the employer “reasonably expects to pay upon hire.” Prior to this amendment, employers could face uncertainty over how broadly to define a posted “pay scale.”

Employers posting jobs in multiple states face increasingly complex disclosure requirements. At minimum, employers should audit current job postings for salary range compliance, implement salary history inquiry bans in recruiting processes, and establish recordkeeping protocols for compensation data. With the Massachusetts Attorney General and New Jersey Department of Labor actively enforcing pay transparency provisions and Virginia’s private right of action, the risks associated with non-compliance have increased significantly.

AI & Employment

Regulation of AI and automated decision-making tools in employment is shifting from broad anti-discrimination principles toward more specific governance, notice, and documentation requirements. Several states have recently enacted or amended laws and regulations imposing requirements on employers that use AI tools in the workplace.

Colorado, for example, originally adopted a broad high-risk AI framework under Colorado’s AI Act, SB 24-205, that imposed reasonable-care, risk-management, impact-assessment, disclosure, and Attorney General reporting obligations on developers and deployers. In May 2026, Colorado enacted SB 26-189. The new law, which will go into effect on January 1, 2027, substantially revises that framework, shifts the law toward automated decision-making technology (ADMT), and requires developers of covered ADMT to provide deployers with technical documentation addressing, among other things, appropriate use, known limitations, intended and known harmful uses, categories of training data, and instructions for meaningful human review. The revised Colorado law eliminates the earlier duty of reasonable care to prevent algorithmic discrimination and removes deployer risk-management and impact-assessment obligations. Colorado also disposed of the requirement to report known or reasonably foreseeable algorithmic-discrimination risks to the Colorado Attorney General within 90 days.

Effective January 1, 2026, Illinois amended the Illinois Human Rights Act to make employers liable for civil rights violations when their use of AI in covered employment decisions—including recruitment, hiring, promotion, and discharge—has the effect of discriminating against employees based on protected characteristics. Employee notice is required whenever AI is used in a covered employment decision. Prior to this amendment, employers primarily managed AI-related discrimination risk through generally applicable employment discrimination laws.

Texas’s Responsible AI Governance Act, effective January 1, 2026, prohibits AI systems that intentionally discriminate against protected classes. Notably, disparate impact alone is insufficient to demonstrate an intent to discriminate. The Act does not create a private right of action—enforcement rests exclusively with the Texas Attorney General—but it does provide a safe harbor for employers who conduct anti-bias audits and cure any discovered violations within a reasonable time.  

Employers using AI in hiring, performance management, promotion, discipline or termination decisions should consider anti-bias testing, documented validation protocols, and human-review procedures to mitigate litigation risks.