HR Compliance 2026: Your Mid-Year Labor Law Update

Summer is supposed to be the slow season. People book vacations, managers sort out the PTO calendar, and half the office is mentally at the beach by noon on Friday. For most departments, July is a breather.

HR doesn’t get one this year.

Last month I attended SHRM, and one session in particular stuck with me. Brian Elfrink, Director of Product Management at Experian Employer Services, spent 60 minutes walking a packed room through the regulatory changes hitting employers right now. He’s been in HR compliance technology for two decades, the last ten years focused on I-9 and payroll tax. To sum up the current state of labor compliance, he said this:

“This is the first time in 10 years that I’ve seen this level of scrimmage and enforcement.”

That tracks with what my team at Jumpstart HR is seeing across our clients. Federal enforcement priorities have shifted, states are passing their own rules faster than anyone can read them, tax credits are in limbo, and AI is quietly making hiring decisions inside tools few HR leaders have time to audit. Wait until Q4 to sort this out and you’re not planning anymore. You’re reacting, probably with an auditor already on the phone.

So use the slow weeks for what they’re good for. Here’s where I’d put your attention before Labor Day.

I-9 Compliance Is Now a C-Suite Problem, Not a Paperwork Task

If you read nothing else here, read this part.

Back in March 2026, ICE updated its guidance on I-9 inspections, and it changed the math for every employer in the country. This wasn’t a new law. It was a shift in enforcement strategy, which in some ways is worse, because it happened quietly and it applies to everyone. Every employer, every size, every new hire needs an I-9 on file, so nobody is exempt from this.

What changed is that a whole category of common mistakes got reclassified from “technical” (correctable) to “substantive” (immediately fineable). A missing hire date. Incomplete document information. A gap in the preparer or translator section. These aren’t exotic errors. They happen in ordinary onboarding every single day.

The part that should get your attention is the correction window. As Brian put it: “Historically, employers have 10 days to fix errors after an audit. Now that correction window is largely gone. The safety net is eliminated. Compliance must be correct the first time.”

And the fines add up fast. Civil penalties currently run from $288 to $2,861 per form, assessed per employee, for paperwork and substantive violations. Knowing violations climb much higher. When you’re talking about a workforce of a few hundred people with sloppy files, you’re looking at six-figure exposure without anyone ever hiring a single unauthorized worker. The risk here is boring, everyday mistakes made over years, not deliberate fraud.

I’ll say the thing Brian said, because it’s right: I-9 compliance belongs in a C-suite conversation now. Not because it’s suddenly glamorous, but because the financial and operational risk is just that big. His closing line on the topic is the one I want you to keep impressing upon your team: “The organizations that win here aren’t the ones that audit better, they’re the ones that eliminate errors before they ever happen.”

So do the internal review now, before a Notice of Inspection shows up with a three-day clock attached. Pull a real sample of your I-9s and check them against current requirements. Confirm your retention schedule. Sit down with anyone who touches onboarding and make sure they actually understand what a correct form looks like, not just which boxes to fill. And if you’re still doing I-9s on paper across multiple sites, that’s the first thing I’d fix.

On our consulting team, I-9s are the first thing we check when we take on a new client. It’s a direct financial risk to the business, and it’s a litmus test for how strictly a company follows labor law in general. If the I-9 files are a mess, that usually tells you what the rest of the documents look like too. This used to be the kind of thing you could quietly clean up and keep moving. Now the urgency is real enough that it’s a day-one conversation.

For the primary sources, USCIS runs I-9 Central with the current form, instructions, and retention rules, and ICE publishes its Form I-9 Inspection Overview laying out how inspections actually work.

Don’t Stop Screening for the Work Opportunity Tax Credit

The Work Opportunity Tax Credit is in a weird spot, and a lot of employers are handling it exactly wrong.

Here’s the situation. WOTC officially expired on December 31, 2025, and Congress hasn’t renewed it. As of the middle of 2026, the program sits in a legislative hiatus with no active authorization for 2026 hires. On paper, you can’t claim the credit for anyone who started this year.

The instinct is to shrug and stop screening. Don’t.

This program has lapsed and come back more than a dozen times, almost always with a retroactive window that reaches back and covers the gap. Brian’s advice was to “treat WOTC as a contingent asset” and keep tracking eligible hires even when you can’t claim the credit yet, and I agree with him. If you keep screening through the hiatus and Congress renews the credit retroactively, you get to claim it. If you stopped, that money is simply gone, and you can’t recreate documentation after the fact.

Here’s the wrinkle as of this writing: the IRS retired Form 8850 in March 2026, and there’s no active submission window while the credit is lapsed. The pre-screening request that used to be due within 28 days of a start date isn’t being accepted right now. So the move is to keep your own internal screening and documentation going, so you know exactly which hires would have qualified. If Congress revives the credit and reopens the process, you can move fast on a retroactive claim instead of scrambling to reconstruct who was eligible months later. The credit was worth up to $2,400 to $9,600 per qualifying hire before it expired, depending on the category, so for anyone doing high-volume or frontline hiring, this is real money to leave on the table.

One more thing: this isn’t only an HR decision. Whether to keep screening during a lapse touches tax and finance, so loop them in rather than making the call alone.

The IRS WOTC page has the program status and eligibility categories, the IRS notice that Form 8850 is no longer in use confirms the current lapse, and the Department of Labor’s WOTC page explains the state workforce agency side.

DEI Programs: Keep the Work, Document the Reasoning

Federal priorities on DEI have shifted, and for federal contractors especially, the ground has moved from policy preference to contract compliance.

This does not mean you dismantle your inclusion efforts. What it means is that the reasoning behind employment decisions now needs to be documented and defensible. Enforcement attention has landed on things like race-based hiring goals or quotas, and programs where access or eligibility turns on race or ethnicity. The focus is on differential treatment, not on inclusion as a concept.

If you hold federal contracts, this is not a “get to it eventually” item. Audit your programs for any eligibility or participation criteria tied to a protected characteristic, make sure hiring and promotion decisions are grounded in merit and actually written down that way, and get legal eyes on anything ambiguous. July, before contract renewals and reporting deadlines stack up, is a good time to do it calmly instead of under a deadline.

Even if you’re not a contractor, read the direction of travel. Broader scrutiny from the EEOC and DOJ is the clear signal, and documentation is your protection either way.

The EEOC’s guidance on DEI-related discrimination at work is the reference to keep handy here.

What we tell our clients is straightforward: champion diversity, and do it without running afoul of the law. Those two goals can operate without tension. As guidance evolves on the matter, keep updating your processes.

AI Governance Can’t Wait for the Regulators to Catch Up

AI stopped being a novelty a while ago. It’s screening resumes, ranking candidates, scheduling interviews, and feeding your workforce analytics, often through tools you already pay for and may not think of as “AI” at all.

That’s the problem. A lot of organizations are running AI inside hiring and performance decisions without a clear picture of where it lives or what it’s actually deciding.

Meanwhile the rules are changing. The federal government pulled its AI hiring guidance in 2025, and the states rushed to fill the gap. Brian’s number from the SHRM stage: “Over 1,500 different bills have already been introduced across 45 states. We have entered a very fragmented state-driven regulatory environment for AI.” Colorado, Illinois, Texas, California, and Connecticut have each passed or finalized their own approach, and they don’t all agree with each other. If you hire – or even simply recruit – across state lines, you inherit all of them.

Here’s the part people miss: the federal guidance disappearing didn’t erase your obligations. Title VII still applies. If an algorithm screens people out in a way that creates a disparate impact, that’s still on you, guidance page or no guidance page.

A lot of what we research and publish at Jumpstart HR keeps circling this same gap: companies buy the tool before anyone decides who owns the risk it introduces. Our HR technology research digs into how teams actually adopt these systems, and the ones who get burned are almost always the ones who skipped that ownership question. I would call your attention to our recent HR Compliance Category Guide.

Start with an inventory. Find every tool touching recruiting, hiring, performance management, employee communication, and analytics, and write down what each one does. Then put governance around it: human oversight, documentation, vendor accountability, employee privacy, and ongoing monitoring. It doesn’t have to be elaborate. It has to exist and be written down, because “we didn’t know it was making that decision” is not a defense anyone wants to test.

The NIST AI Risk Management Framework is a solid, free starting point for structuring that governance, and the EEOC’s materials on Title VII and employment tests and selection procedures still govern automated hiring tools.

State Employment Laws Keep Multiplying

Federal is only half the job. If you operate in more than one state, the state-level churn is what’ll actually trip you up, and 2026 has been a busy year. A few Brian flagged that took effect this year:

Connecticut SB 5, signed May 27, 2026, is one of the most comprehensive state AI laws yet. For employers, the heart of it is regulation of automated employment decision tools: disclosure when AI is used in employment decisions, notice to candidates and employees, and a clear statement that using AI doesn’t shield you from discrimination liability. Effective dates phase in from October 2026 through 2027.
Virginia SB 2, signed April 2026, creates a state-run paid family and medical leave program. Like almost every law of its kind, it brings new employee notice requirements and forces coordination with your existing leave and payroll setup.
Indiana SB 76, signed March 5, 2026, is a wide-ranging immigration enforcement law that expands employer obligations and adds real teeth, including fines and potential loss of business licenses. If you do business in Indiana, read this one closely.

Then there’s the posting problem that almost nobody budgets for. Coming out of the pandemic, states including California, New York, and Illinois passed rules requiring that labor law information reach remote employees, not just hang on a break-room wall. If your whole compliance strategy is a poster by the coffee machine, you’re not covering the person working from their kitchen in another state. As Brian said about those three states leading the way, “whenever we see New York, California, and these types of laws, others will follow.” Expect more of this.

We had a client recently who had no idea that California treats accrued PTO as earned wages, which means the “use it or lose it” approach they’d carried over from another state simply wasn’t legal there. They’d hired someone in California off a handbook written for a different state entirely. We ended up rewriting their PTO carryover language so the policy actually matched California law. It’s the kind of thing that never crosses your mind until one employee in the wrong state turns it into a problem.

The Department of Labor keeps a current workplace poster guide, and its state labor offices directory is the fastest way to get to each state’s specific rules.

Your July Mid-Year Compliance Checklist

If you want one page to work from, here it is. None of this requires a big budget. It mostly requires a few quiet weeks and the discipline to use them.

Run an internal I-9 audit and correct the errors you’re still allowed to correct.
Check onboarding for consistency across every location and hiring manager.
Keep screening and documenting WOTC-eligible hires so you can claim retroactively if Congress revives the credit (the IRS has retired Form 8850 for now).
Review DEI programs and make sure the reasoning behind employment decisions is documented and merit-based.
Build an inventory of every AI tool used anywhere in your HR stack.
Write or update your AI governance policy — even a simple one.
Review the state law changes that hit the states where your people actually work.
Confirm your labor law notices reach remote employees, not just the office wall.
Schedule compliance training for HR and hiring managers before the fall rush.
Write down an action plan for every gap you find, with an owner and a date.

The Real Shift: Compliance Is a Leadership Issue Now

Compliance has always been part of HR’s job. What’s changed is where it sits.

The decisions you make this July touch financial risk, business continuity, staffing, the technology you buy, and how your company looks to the outside world. That’s not a back-office administrative function anymore, and treating it like one is how six-figure fines and failed audits happen. I wrote a whole book, The Power of HR, about HR earning a real seat at the strategy table. This moment — where a missed I-9 or an unaudited algorithm becomes a board-level risk — is exactly the shift I was talking about.

Brian said the documentation thread runs through every one of these topics, and he’s right. I-9s, WOTC, DEI, AI, state notices. The common denominator is being able to show your work when someone asks. So while your colleagues are out of office and the inbox is finally quiet, do the unglamorous thing. Pull the files, take the inventory, write the policy. Future-you, sometime around October, will be very glad you did.

Managing multi-state compliance and not sure where the gaps are? That’s the work my team at Jumpstart HR does every day. Let’s talk.