Labor & Employment Law Update

State lawmakers across the country have been busy this year trying to curb the most consequential uses of AI in employment-related decisions. As those attempts moved from idea to legislation, two powerful forces have pushed back. The tech industry is concerned about a patchwork of state rules, and the Trump administration has prioritized removing barriers to AI use. States are reacting by shifting their strategies to narrow, revise, and/or delay legislation. Employers would be wise to stay abreast of these evolving strategies to ensure compliance in a rapidly shifting regulatory landscape.

On September 19, 2025, the U.S. Department of Labor (DOL) announced the launch of Project Firewall, described as “an H-1B enforcement initiative that will safeguard the rights, wages, and job opportunities of highly skilled American workers by ensuring employers prioritize qualified Americans when hiring workers and holding employers accountable if they abuse the H-1B visa process.”

On August 19, 2025, the Fifth Circuit Court of Appeals upheld injunctions barring the National Labor Relations Board (NLRB) from prosecuting unfair labor practices (ULP)/charges against three employers, including Space X. This decision stems from the constitutional challenges to the way the NLRB is structured and raises broader questions about the current structure of the NLRB.

Employers should review key state employment law updates that occurred in September 2025 to ensure compliance with new leave rights, posting requirements, and employee protections across multiple states.

On Friday, September 19, 2025 the Internal Revenue Service issued proposed regulations clarifying the “no tax on tips” provisions under President Trump’s One Big Beautiful Bill Act.  Starting January 1, 2026, eligible tipped workers can deduct up to $25,000 each year in “qualified tips” from their federal taxable income through December 31, 2028. This will allow eligible tipped workers to take home more income each year. The deduction is retroactive to the beginning of the 2025 tax year, meaning it can be used by tipped workers to deduct qualified tips in the 2025 tax year. But the catch is that your payroll systems need updates NOW in order to properly track and report this new benefit for employees.

It is becoming more common for employees to claim “bullying” or “harassment” when a supervisor enforces rules, sets boundaries, or addresses underperformance. While it is important to take every complaint seriously, company leadership must also recognize the distinction between inappropriate conduct and the normal exercise of managerial responsibilities.

Earlier this month, the Sixth Circuit issued a decision in Bivens v. Zep that significantly narrows when an employer can be held liable under Title VII for harassment committed by a third party, such as a customer or client. The court held that an employer may only be liable in this scenario if the employer intended for the harassment to occur. This ruling departs from the EEOC’s longstanding interpretation of Title VII as well as from the majority of other federal appeals courts that have considered the issue.

On September 3, 2025, in Minnesota Chapter of Associated Builders and Contractors v. Ellison, et al., the U.S. Court of Appeals for the Eighth Circuit, in a 2-1 ruling, dismissed a lawsuit challenging Minnesota’s captive audience speech law (aka the “Employer-Sponsored Meetings or Communication Act” or the “Act”).  In short, the Eighth Circuit’s decision means that the Act remains in effect and is enforceable against Minnesota employers. 

Governor Pritzker recently signed yet another amendment to the Illinois Prevailing Wage Act (“IPWA”). While this latest change does not directly impact non-union/merit shop contractors, it does have an immediate impact on certain union signatory contractors. Courtesy of HB2488, effective June 30, 2025 forward, all contractors must ensure that their apprentices are paid full journeyworker fringe benefits—regardless of the terms in the underlying prevailing union contract.

As employers keep their eye on compliance, here are some notable employment law changes that will be effective in the coming months.