The Latest – Federal Contractor DEI Deadlines, Non-Compete Rollbacks, EEOC Vaccine Enforcement, And Rising Health Costs (March 2026)

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.

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The end of March has handed HR leaders a list of items that demand attention now. A federal executive order is pushing toward an April 25 compliance deadline that directly affects organizations holding government contracts. Courts and state legislatures are drawing new limits on non-compete agreements. Enforcement signals from the EEOC underscore that civil rights obligations apply even when emergency conditions drive workplace policy. And healthcare costs are rising at a pace that most benefits budgets have not absorbed before.

These developments do not share a single regulatory thread, but they share a practical one: each requires HR to review something — a contract, a policy, an agreement, a benefits plan — before the pressure arrives.

Effective Date: March 26, 2026

What’s Changing:

On March 26, 2026, President Trump signed an executive order directing federal agencies to incorporate new compliance language into covered contracts within 30 days. The required clause provides that contractors may not engage in what the order defines as “racially discriminatory DEI activities,” including employment or contracting decisions that treat individuals differently based on race or ethnicity.

The order extends beyond direct hiring decisions. It reaches participation in employer-sponsored programs, including training, mentoring, leadership development, and similar opportunities, if access is tied to protected characteristics. Contractors must also provide records and information upon request to demonstrate compliance and report certain subcontractor violations.

The order applies to contractors and subcontractors and signals a broader enforcement posture. Noncompliance may lead to contract termination, suspension, or disqualification from future federal work, and compliance certifications may carry False Claims Act exposure.

What remains unclear is how agencies will interpret and enforce the scope of “racially discriminatory DEI activities.” Additional guidance is expected, but contractors are already preparing for implementation as new contract language begins to roll out.

HR Takeaway

Federal contractors should not assume that all DEI-related efforts are prohibited, but they should assume that any program tied to protected characteristics will be scrutinized.

Steps to take now:

• Inventory all programs that affect hiring, promotion, contracting, or access to workplace opportunities.
• Separate programs tied to employment decisions from broader outreach or pipeline efforts.
• Review active and pending contracts for new compliance language and flow-down requirements.
• Engage employment and government contracts counsel to assess risk before April 25, 2026.

Effective Date: Settlement announced March 24, 2026

What’s Changing:

The Equal Employment Opportunity Commission announced a $15 million conciliation agreement resolving discrimination charges related to COVID-19 vaccine mandates. Andrea Lucas emphasized that there was no pandemic exception to federal civil rights laws and that employers remained responsible for complying with accommodation requirements.

The charges involved employees who requested religious or disability-based exemptions from vaccine mandates. According to the EEOC, the employer failed to adequately engage in the interactive process and, in some instances, denied accommodation requests without individualized assessment.

The resolution is one of the larger settlements tied to pandemic-era employment practices and reflects continued enforcement activity tied to decisions made during that period. The EEOC’s position reinforces that obligations under Title VII of the Civil Rights Act and the Americans with Disabilities Act applied throughout the pandemic, including in the context of workplace safety policies.

HR Takeaway

If your organization implemented vaccine mandates, the risk now is less about the policy itself and more about how exemption requests were handled.

Key questions to examine:

• Were accommodation requests documented and individually evaluated?
• Was there a clear, consistent process for religious and disability exemptions?
• Do records reflect a good-faith interactive process before denying requests?

Effective Date: Virginia Senate Bill 170, effective July 1, 2026; Washington State law, effective June 30, 2027

What’s Changing:

States continue to move ahead on non-compete restrictions while federal action remains uncertain. In Virginia, the General Assembly passed Senate Bill 170 on March 4, 2026, further narrowing the enforceability of non-compete agreements under state law. The legislation builds on Virginia’s existing restrictions, including limits on non-competes for lower-wage workers, and adds additional limitations tied to the employment relationship and circumstances of separation.

In Washington State, Governor Bob Ferguson signed House Bill 1155, which significantly expands existing limits on non-compete agreements. Washington already imposed income thresholds and other restrictions; HB 1155 further limits when non-competes can be used, making them largely unusable for most employees and independent contractors.

Washington now aligns more closely with states such as California, Minnesota, and North Dakota, where non-competes are either prohibited or so restricted that employers rely on alternative protections.

At the federal level, the Federal Trade Commission rule banning non-competes remains tied up in litigation. In the meantime, state-level activity continues to reshape the landscape, creating compliance challenges for multi-state employers.

HR Takeaway

Non-competes are no longer a reliable, one-size-fits-all tool. Employers should expect continued state-by-state divergence and adjust accordingly.

• Identify employees in Virginia and Washington with existing non-compete agreements.
• Review enforceability under current and upcoming state law.
• Shift focus to non-solicitation, confidentiality, and trade secret protections where appropriate.
• Avoid issuing new non-compete agreements in Washington after the effective date.

Effective Date: 2026 plan year renewals

What’s Changing:

Employers renewing fully insured health plans for 2026 are facing significant premium increases. According to the USI 2026 Employee Benefits Market Outlook, many employers are seeing average increases in the 18% to 25% range, with some groups experiencing hikes exceeding 60%.

Healthcare cost trends are projected to remain elevated, continuing to outpace general inflation and wage growth. At the same time, the Social Security cost-of-living adjustment for 2026 is approximately 2.4%, underscoring the widening gap between healthcare costs and income adjustments.

The increases reflect multiple pressures: higher utilization of specialty and high-cost medications, expanded coverage of GLP-1 drugs, deferred care now moving through the system, and broader medical inflation. Specialty drugs alone now account for more than half of all prescription drug spending, further accelerating cost growth.

For employers sponsoring retiree medical coverage, a recent study from the Employee Benefit Research Institute estimates that a healthy 65-year-old couple may need approximately $469,000 to cover healthcare costs in retirement.

Organizations with self-insured plans are experiencing similar pressure through increased claims activity and higher stop-loss premiums.

HR Takeaway

Benefits teams heading into mid-year reviews or early 2027 renewal planning should start with current data, not last year’s assumptions.

• Review current plan utilization and claims trends against budget projections.
• Reassess cost-sharing structures in light of sustained increases.
• Evaluate network strategies and plan design options.
• Develop clear employee communications that explain both cost pressures and benefit value.

Effective Date: Minnesota HF 4369 and SF 4576 advancing in March 2026; Illinois HB 3773 pending; California AB 1898 pending in 2026

What’s Changing:

State legislatures are moving beyond AI hiring disclosures and into broader workforce protection measures tied to automation and workplace technology.

In Minnesota, HF 4369 and SF 4576 would require employers to provide at least 90 days’ written notice before a technological displacement affecting 25 or more employees, or 25% of the workforce, whichever is less. The requirement is not limited to artificial intelligence and applies to broader technology-driven workforce changes. Notice must be provided to affected employees, any employee organization representing them, the commissioner, and the local workforce development board. The bills also require employers to identify impacted roles and outline the anticipated workforce impact.

In Illinois, House Bill 3773 would make it a civil rights violation to use artificial intelligence in a way that results in discrimination based on protected characteristics. The bill also requires employers to notify employees when AI is used in employment-related decisions.

California’s Assembly Bill 1898 takes a different approach, focusing on transparency and governance. The bill would require written notice when workplace AI tools are used in employment-related decisions or to monitor workers, including advance notice before initial deployment for affected employees. It also requires employers to maintain and distribute an inventory of workplace AI tools on an annual basis.

Taken together, these proposals reflect a broader shift. States are beginning to regulate not only how AI is used in hiring, but also how technology affects workforce structure, decision-making, and employee visibility into those systems.

HR Takeaway

Employers should not wait for these bills to pass before taking action. The direction is clear, and the operational lift will take time.

• Build or update an inventory of AI and technology tools used across the employment lifecycle.
• Identify where those tools influence hiring, performance management, monitoring, or workforce reduction decisions.
• Document how decisions are made and whether human review is involved.
• Monitor Minnesota, Illinois, and California developments for final requirements and effective dates.

The developments this month span several functions at once. The federal contractor DEI order is a contract compliance issue as much as a program review. The EEOC settlement is a signal about how long pandemic-era decisions will remain relevant. Non-compete rollbacks change retention strategy in two additional states. Premium increases are squeezing benefits budgets. And AI notice bills add a documentation obligation to tools that many HR teams already use.

What connects all five is documentation and process. HR teams that can show their work — reviewed programs, logged exemption requests, current agreements, updated plan designs, and inventoried AI tools — are better positioned to respond to issues that surface as contract audits, regulatory inquiries, or employee concerns.

The most useful thing HR leaders can do before April arrives is run each item on this list against what they know about their own organization. Not every development requires major action, but most of them are worth a conversation with counsel or a benefits partner before the calendar moves forward.

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