Each year, we step back to review the employment law developments employers should be watching in the year ahead — at both the federal and state level.
As we move into 2026, the employment law landscape continues to evolve. At the federal level, the current administration is reshaping workplace policy through agency leadership changes, regulatory reviews, enforcement priorities, and ongoing litigation. Notably, both the Equal Employment Opportunity Commission (EEOC) and the National Labor Relations Board (NLRB) now have a quorum after operating without one for much of the past year — restoring their ability to issue guidance, revise regulations, and decide pending cases. Some of these efforts may result in formal changes this year, while others signal longer-term shifts employers should be aware of as they plan and make decisions.
This annual update provides a high-level look at federal employment law issues to keep on your radar in 2026, along with key Alabama state law developments that may affect employers operating in or employing workers in the state. While we can’t predict outcomes, our goal is to help ensure leaders across industries are informed about what may be coming in the year ahead — and where policy and enforcement signals suggest potential change.
Pregnant Workers Fairness Act (PWFA)
The biggest potential federal employment law change this year may involve the Pregnant Workers Fairness Act (PWFA), which was signed into law in 2022. The current administration has indicated that it intends to review the prior administration’s guidance on the PWFA, including whether to narrow aspects of the EEOC’s interpretation related to how broadly accommodations are defined, what the interactive process must include, and which issues are prioritized in enforcement.
At the same time, ongoing litigation continues to shape how the law is applied. These challenges include a case brought by 17 states contesting the EEOC’s expansive interpretation of “pregnancy, childbirth, or related medical conditions,” as well as a 2024 Louisiana case that blocked certain religious employers from being required to accommodate elective abortions. Most recently, on January 14, 2026, the U.S. Court of Appeals for the Fifth Circuit announced it will reconsider whether the PWFA was constitutionally enacted, adding another layer of uncertainty to how the law may ultimately be interpreted.
Taken together — the EEOC’s regulatory review, constitutional challenges moving through the courts, partial injunctions, and continued enforcement of current cases — the PWFA is an area where employers may see clarification or adjustment sooner rather than later. Importantly, the law itself remains in effect, and employers should continue to comply with current requirements while monitoring how guidance and enforcement priorities may evolve. For organizations that implemented broad policy changes in response to the initial regulations, this is an area worth watching closely in 2026.
Fair Labor Standards Act (FLSA)
While the PWFA represents one of the clearest areas where regulatory refinement may occur this year, wage and hour law remains the area where even incremental changes can have the greatest operational and financial impact for employers.
The 2024 FLSA white-collar salary threshold increase was rolled back by the federal courts and remains on hold. As a result, the Department of Labor (DOL) is expected to revisit the salary threshold in 2026, with the potential for a more modest increase than previously proposed. The DOL has also signaled that additional regulatory action may be forthcoming, leading some to anticipate that the agency could review not only the salary level, but also the duties tests used to determine exempt status.
In addition, the current administration has indicated it intends to rescind the Biden administration’s six-factor “economic realities” test for independent contractor classification. In 2025, the DOL announced it would no longer apply the Biden-era test when investigating wage and hour claims and is expected to revert to the two “core factors” framework used during the prior Trump administration. At present, while the DOL is not using the six-factor test in enforcement actions, it remains the regulatory standard applied in private litigation — creating a split employers should continue to monitor.
Employee Benefits and ERISA
Employee benefits regulation is another area to watch in 2026, particularly under ERISA. While major statutory changes are unlikely, the Department of Labor continues to shape employer obligations through enforcement priorities and sub-regulatory guidance rather than new legislation. Areas of focus include fiduciary oversight of retirement plans, mental health parity compliance, and transparency requirements for health plans. Together, these developments suggest that expectations around benefits governance, documentation, and oversight may continue to evolve as enforcement activity continues.
National Labor Relations Board (NLRB)
After operating for much of last year without a quorum, the National Labor Relations Board is fully operational again in 2026, allowing it to issue decisions, clear its backlog, and advance policy priorities that had been on hold. Employers should expect increased Board activity beginning with long-pending unfair labor practice and representation cases.
With a newly aligned majority, the Board may revisit several Biden-era positions through case decisions rather than formal rulemaking, including standards governing employee handbook policies, independent contractor classification, bargaining unit determinations, and union election procedures. While major shifts may unfold gradually, the restoration of a quorum alone signals a more active enforcement and decision-making environment for employers in 2026.
AI in Employment Decisions
The use of artificial intelligence and automated decision systems in hiring, promotion, and performance management continues to be an emerging employment law risk area in 2026. While there is still no comprehensive federal law governing AI in employment, courts and regulators are increasingly applying existing anti-discrimination and labor laws to AI-assisted decision-making.
One of the most closely watched cases is Mobley v. Workday, Inc., pending in federal court in California. In that case, plaintiffs allege that Workday’s AI-driven applicant screening tools disproportionately excluded older, Black, and disabled applicants, in violation of Title VII, the ADEA, and the ADA. In 2025, the court allowed the case to proceed as a nationwide collective action, reinforcing the principle that employers may face liability for discriminatory outcomes even when decisions are influenced by third-party AI tools.
At the state level, Alabama has begun engaging in AI policy discussions, though it has not enacted a law specifically regulating the use of AI in employment decisions. Recent legislative activity has focused on AI disclosure requirements and limitations on AI-only decision-making in certain industries, such as insurance, signaling increased attention to how automated systems affect individuals and consumers. To date, Alabama continues to rely on existing employment and anti-discrimination laws to address AI-related workplace issues.
For employers, the takeaway in 2026 is less about immediate statutory change and more about risk management and oversight. Employers using AI tools should understand how those systems operate, evaluate outcomes for potential disparate impact, and be prepared to explain and defend employment decisions that rely on automated or algorithmic processes as scrutiny continues to evolve.
Alabama Employment Law Updates to Watch
While Alabama has not enacted sweeping employment law reforms, several administrative and statutory changes taking effect in late 2025 and 2026 are worth noting for employers operating in or employing workers in the state.
Portable Benefits Accounts for Independent Contractors (Effective December 31, 2025)
Under Alabama Senate Bill 86, independent contractors may begin establishing voluntary portable benefits accounts at the end of 2025. These accounts are designed to allow contractors to receive contributions for benefits such as health care or retirement without altering their classification status. Participation is optional, but employers that rely on contractors or gig workers should understand the framework, as it may influence contractor expectations, engagement models, and competitive positioning.
Nonresident Tax Withholding Changes (Effective 2026)
Beginning in 2026, Alabama will exempt certain nonresident workers from state income tax and withholding for work performed in the state for 30 or fewer days, provided the employee’s home state offers reciprocal treatment. This change is particularly relevant for employers with mobile, project-based, or traveling workforces and may require updates to payroll tracking and withholding practices.
Looking Ahead
While 2026 may not bring immediate, across-the-board changes, the direction of policy, enforcement, and litigation offers important insight into where expectations for employers may be headed. Staying informed allows leaders to anticipate change, assess risk, and respond thoughtfully as guidance evolves. We will continue tracking these developments throughout the year and working with organizations to translate legal change into practical, operational decisions.
