2025 IN REVIEW: THE YEAR EMPLOYMENT LAW GOT REAL

If 2024 was the year of speculation — when HR and legal teams braced for everything from AI regulation to sweeping wage transparency rules — 2025 was the year it all became real. Federal agencies delivered on long-teased proposals, state legislatures kept expanding worker protections, and employers faced an increasingly fragmented patchwork of obligations.

For PEOs, that meant more client hand-holding, more compliance monitoring, and more education at scale. As we close the year, it’s worth taking stock of the top changes that defined 2025 — and what they signal for 2026.

1. WAGE TRANSPARENCY: THE PATCHWORK TURNED INTO A QUILT

At the start of 2025, only a dozen states had formal pay transparency mandates. By year-end, that number has more than doubled. New entrants — including Illinois, Michigan, and Pennsylvania — rolled out their own versions of salary range disclosure laws, each with a slightly different twist.

For PEOs, the challenge wasn’t just updating job postings or pay bands — it was standardizing inconsistent state rules across client locations. Some jurisdictions required disclosure in all postings, others only for internal transfers, and still others applied thresholds based on company size or remote status.

PEOs increasingly became the “translator” between multi-state compliance and practical HR execution, updating templates, conducting manager training, and ensuring clients avoided disparate pay audits. The lesson: treat transparency as an ongoing process, not a one-time policy.

2. FEDERAL AGENCIES REASSERTED THEMSELVES

After several years of back-and-forth in the courts, 2025 brought renewed regulatory vigor from Washington. The Department of Labor (DOL) finalized its much-anticipated update to the FLSA “white-collar” exemptions, raising the minimum salary threshold for exempt employees to nearly $61,000. Employers scrambled to reclassify workers or bump salaries to maintain exemptions — a heavy administrative lift that fell largely to PEO payroll and HRIS teams.

Meanwhile, the National Labor Relations Board (NLRB) continued pushing its broader definition of “joint employment.” Although litigation is ongoing, the Board’s emphasis on indirect control once again raised questions for the PEO model — particularly around shared supervision and policy enforcement.

The takeaway: PEOs must document role boundaries carefully. Client Service Agreements should clearly delineate which party exercises which control. The best operators are already refreshing templates and training staff on what “joint employer” really means in practice.

3. THE RISE (AND REGULATION) OF AI IN HR

No 2025 recap would be complete without addressing artificial intelligence. By now, most PEOs have dabbled in AI-driven recruiting, analytics, or chatbot support. But this year, state and local governments began demanding transparency and accountability in how those tools are used.

New York City expanded its Automated Employment Decision Tools law, California and Washington followed with their own disclosure mandates, and the EEOC issued technical guidance clarifying that algorithmic screening still must comply with Title VII.

For PEOs and their clients, this wasn’t an abstract risk — it affected the products and platforms used to deliver HR services. Many had to audit vendors, adjust client communications, and create “AI fairness statements” explaining how tools are validated.

Expect 2026 to bring more formal audit obligations and even potential certification requirements. Compliance now means understanding your technology stack as deeply as your pay codes.

4. STATE LEAVE LAWS MULTIPLY (AGAIN)

Paid family and medical leave continued to be one of the fastest-moving areas of employment regulation. This year saw new programs launching in Maryland, Minnesota, and Oregon, with expanded benefits in Colorado and New Jersey. The administrative complexity of multi-state clients ballooned — and PEOs were on the front lines of figuring out funding mechanisms, payroll integration, and employee education.

The smartest PEOs took a “centralized tracking, localized compliance” approach: one national dashboard to track eligibility and accruals, paired with state-specific documentation and client briefings.

Looking ahead, expect at least three more states to enact PFML statutes in 2026, including Texas — long resistant but now signaling openness to employer-funded leave models.

5. DEI MOVES TOWARD “BELONGING” AND COMPLIANCE SAFETY

The U.S. Supreme Court’s 2024 decision restricting race-based preferences in higher education continued to ripple into the corporate world throughout 2025. Lawsuits and state attorney general warnings prompted many employers to rebrand DEI initiatives as “belonging” or “inclusion” efforts centered on equal access and compliance.

PEOs had to walk a tightrope: helping clients maintain values-driven cultures while avoiding programs that could be perceived as preferential or quota-based.

The key evolution? Shift from identity-based programming to behavior-based training. Rather than teaching demographic awareness, PEOs are now emphasizing inclusive leadership behaviors — communication, feedback, and decision-making — tied to measurable performance outcomes.

6. WORKPLACE SAFETY EXPANDED BEYOND THE PHYSICAL

OSHA’s new rule on Heat Illness Prevention, finalized in mid-2025, marked a major milestone. For the first time, federal law imposed uniform heat exposure standards across industries. Meanwhile, psychological safety — once a soft topic — found itself at the center of workplace wellness initiatives, with several states mandating mental health accommodations similar to physical disability standards.

PEOs and their clients responded by building integrated EHS and mental-health risk management programs, blending ergonomic training with stress reduction policies. Expect more enforcement on this front in 2026 as regulators test the boundaries of “workplace safety” in hybrid environments.

7. THE COMPLIANCE META-TREND: FRAGMENTATION MEETS ACCOUNTABILITY

If there’s a unifying theme to 2025, it’s that the compliance landscape is more fragmented but more enforceable. Every state seems to want its own rulebook, and yet enforcement tools — from DOL audits to state AG task forces — are becoming more coordinated.

For PEOs, this means elevating compliance from a checklist to a narrative. The story you tell clients about how you monitor risk, vet vendors, and train employees has become part of your value proposition. Compliance is no longer an add-on service — it’s your differentiator.

LOOKING AHEAD TO 2026

As we head into 2026, three predictions stand out:

1. AI Governance Becomes a Legal Mandate. Expect draft federal legislation requiring algorithmic impact assessments for employment tools.
2. National Paid Leave Momentum Accelerates. At least one bipartisan federal proposal is expected, likely modeled after the Social Security framework.
3. Joint Employment Litigation Heats Up. The Fifth Circuit is poised to issue a landmark decision that could redefine employer liability under the NLRA.

The employers that thrive will be those with embedded compliance capacity — not just policies on paper, but systems and partnerships that flex with the rules. For PEOs, that’s both challenge and opportunity. As this year showed, the most successful operators aren’t merely reacting to regulation; they’re anticipating it and building client trust in the process.

FINAL THOUGHT

2025 reminded the industry that employment law doesn’t stand still — it evolves with culture, technology, and politics. For PEOs, the mandate is clear: stay proactive, stay integrated, and stay human. Because at the end of the day, compliance isn’t just about checklists or deadlines; it’s about building workplaces that work.

This article is designed to give general and timely information about the subjects covered. It is not intended as legal advice or assistance with individual problems. Readers should consult competent counsel of their own choosing about how the matters relate to their own affairs.