Compliance Round Up – H-1B Selection Rule, IRS Extends PFML, ACA Subsidies May Expire, Federal Marijuana Policy Updates, and State News

By Published On: December 26, 2025

Jenny Kiesewetter is a practicing ERISA and employee benefits attorney who partners with HR teams on a wide range of workplace compliance matters — from benefit-plan obligations to day-to-day HR policies and regulatory requirements. Her guidance helps employers spot risks early, navigate regulatory change, and make informed decisions that support both employees and the organization.

The regulatory environment around employment is shifting quickly. Federal agencies are releasing new guidance, state legislatures are passing employment laws, and court decisions are setting precedents that directly affect hiring, compensation, benefits, and workplace technology.

The impact shows up in daily operations. Workforce plans need revision. Payroll systems require updates. Vendor agreements deserve a second look. What worked as an informal practice last year may not pass muster today. The days of phasing in compliance over time are largely gone — regulators expect documentation and structure now, not later.

Federal News

Effective Date: February 27, 2026, and will be in place for the FY 2026 H-1B cap selection process beginning in March 2026

What’s Changing:

The Department of Homeland Security finalized changes to the H-1B cap selection process that replace the random lottery with a wage-weighted system. Under the rule, registrations tied to higher Department of Labor prevailing wage levels receive greater selection weight. DHS intends the change to favor higher-skilled and higher-paid roles over lower-wage classifications.

This matters most for companies that hire recent graduates, run rotational programs, or fill entry-level technical roles with lower starting salaries. Even when the pay is competitive for the market, the wage level assigned to the job now determines whether candidates can move forward in the selection process.

What This Means for HR:

  • Review job descriptions, leveling, and wage classifications for accuracy and defensibility.
  • Develop alternative hiring or visa strategies if your workforce depends on entry-level H-1B roles.
  • Align immigration planning with compensation and workforce planning timelines.

Effective Date: January 1, 2026

What’s Changing?

The IRS extended transition relief into 2026 for specific federal tax and reporting obligations tied to state-paid family and medical leave (PFML) programs. The extension gives employers additional time to adjust their payroll and reporting systems as states continue to refine PFML requirements.

The IRS limited the scope of the relief. It generally does not cover situations where employers voluntarily pay employee-required contributions, and it does not eliminate the need for careful multi-state payroll coordination.

What This Means for HR:

  • Identify which PFML contributions qualify for relief and which remain taxable.
  • Coordinate payroll, tax, and leave vendors to ensure consistent treatment across systems.
  • Document compliance decisions and supporting guidance.

Effective Date: December 31, 2025 (scheduled sunset)

What’s Changing?

Enhanced Affordable Care Act premium subsidies expire at the end of 2025 unless Congress acts. These subsidies currently reduce the cost of employee exchange coverage for employees whose employers do not offer health insurance.

If the subsidies lapse, employees relying on exchange coverage will face higher premiums in 2026. Employers without sponsored health plans should expect increased questions during recruiting and retention conversations.

What This Means for HR:

  • Prepare for employee and candidate inquiries about health coverage in 2026.
  • Review how you position roles that do not include health benefits.
  • Evaluate whether limited or voluntary benefits could support retention.

Effective Date: December 18, 2025 (executive action issued)

What’s Changing?

Through an executive order, the White House recently told agencies to take another look at how marijuana is classified and to fund more research. That doesn’t change what’s on the books or force employers to allow marijuana use at work.

Drug testing for safety-sensitive jobs stays put. Roles covered by Department of Transportation rules still require it. People are getting confused because of what they’re reading in the news, not because the legal requirements have shifted.

What This Means for HR:

  • Reconfirm existing drug-free workplace policies with employees.
  • Train HR and managers on how marijuana issues intersect with accommodations and safety rules.
  • Enforce testing and safety policies consistently.

Trending State News

Effective Date: January 1, 2027

What’s Changing?

New York enacted the Responsible AI Safety and Education (RAISE) Act, which regulates advanced or “frontier” AI models and focuses on preventing catastrophic risks. Although the law does not directly target employment decisions, it imposes governance and compliance obligations on AI developers and providers.

AI vendors are likely to push compliance obligations downstream to employers through contracts, audits, and procurement requirements.

What This Means for HR:

  • Expect expanded AI-related representations and warranties in vendor agreements.
  • Update internal AI review and approval processes.
  • Assume New York standards will influence national vendor practices.

Effective Date: January 1, 2026 (discrimination ban); rulemaking ongoing

What’s Changing?

Illinois released draft rules that spell out what employers need to disclose and document when they use AI in hiring or employment decisions. This comes before the state’s discrimination ban takes effect. The rules cast a wide net—if a tool screens resumes, ranks applicants, scores candidates, or suggests who to promote, it likely counts as AI under these definitions.

The state isn’t trying to ban AI in hiring. It wants transparency, proper records, and oversight.

What This Means for HR:

  • Inventory all AI and algorithmic tools used in hiring, promotion, or evaluation.
  • Create standardized notice language for applicants and employees.
  • Implement recordkeeping practices now.

Effective Date: Anticipated 2026 legislative session

What’s Changing: 

Virginia’s political landscape shifted, which means employment bills that got vetoed before have a real shot at passing now. That includes expanded paid sick leave requirements and rules around salary bans and pay transparency. This isn’t about small tweaks; expect lawmakers to push these through with momentum behind them.

What This Means for HR:

  • Conduct a Virginia-specific policy gap analysis.
  • Review leave accrual methods and AI-related workflows.
  • Prepare for operational updates, not cosmetic revisions.

Effective Date: November 3, 2025

What’s Changing: 

Puerto Rico OSHA increased fines for willful violations, repeat offenses, and hazards that remain unaddressed. They also started allowing daily penalties when employers fail to correct problems. The financial risk just went up substantially for companies that drag their feet on fixing issues or can’t show they addressed them.

What This Means for HR:

  • Audit safety programs and inspection readiness for Puerto Rico operations.
  • Confirm postings, training records, and abatement documentation.
  • Treat safety compliance as an active risk-management function.

Around the Courts

Effective Date: Decided November 7, 2025

What’s Changing:

A federal appeals court ruled that night blindness counts as a disability under the ADA and sided with the jury’s verdict. The decision drives home a familiar point: disability determinations come down to individual circumstances. And yes, conditions that affect scheduling or safety can mean an employer needs to provide accommodation.

What got the employer in trouble here wasn’t just the condition itself. It was how they handled the accommodation request — delays and inconsistent treatment became the foundation for discrimination and retaliation claims.

What This Means for HR:

  • Treat medical or safety-related accommodation requests as immediate interactive-process triggers.
  • Document each step, including timing and follow-up.
  • Train supervisors to promptly escalate accommodation issues.

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The information contained in this site is provided for informational purposes only, and should not be construed as legal advice on any subject matter.

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