Client Insight: Quarterly Employment Law Update – Fall 2026

California Workplace AI Surveillance Restrictions (AB 1883), effective January 1, 2027, restricts workplace surveillance using emotion inference or neural data, subject to exceptions.

• Who is covered: The law broadly covers California private and public employers, including labor contractors and entities that contract for labor or services, without a minimum employee threshold. Its protections run to employees, not job applicants.
• Prohibited monitoring: Employers may not use AI-powered workplace surveillance tools to recognize, infer, or predict employees’ emotional states or collect “neural data” measuring activity in an employee’s central or peripheral nervous system. This may include AI features that infer sentiment, mood, stress, or engagement from email, chat, call recordings, or video meetings.
• Important exceptions: The law preserves safety-related uses and monitoring outside the prohibited categories. A separate, limited exception applies to certain aircraft, national-security, military, space, or defense operations where surveillance is reasonably necessary to comply with federal law or a binding federal contract. 
• Penalties: Violations may result in penalties of up to $500 per violation, with enforcement by the Labor Commissioner or public prosecutors and potential injunctive relief, punitive damages, and reasonable attorneys’ fees and costs. Although the law does not create an express private right of action, plaintiffs may seek to pursue these penalties through representative PAGA claims.

This law may change before it takes effect. When Governor Newsom signed it on September 30, 2026, together with other workplace-technology bills, he noted that key definitions are missing and called for clarifying legislation.

California “No Robo Bosses Act” (SB 947) prohibits sole reliance on automated systems for specified adverse employment decisions and imposes human-review and notice requirements beginning July 1, 2027.

• Who and what are covered: The law broadly covers private and public employers using automated decision systems, including qualifying statistical and data-analytics tools, subject to limited collective-bargaining and federal-compliance exceptions. Employers may not use these systems to violate employment laws, infer employees’ protected status, or predict and take adverse action against workers for exercising legal rights.
• Human review: Employers may not rely solely on an automated system to discipline or terminate an employee. When an employer primarily relies on the system’s output, a human must corroborate the decision using underlying data or other relevant evidence. The employer may not use output that cannot be corroborated or is found inaccurate, incomplete, or misleading.
• Employee notice and access: When primarily relying on an automated system, employers must provide a stand-alone, plain-language notice when communicating the decision. The notice must explain the system’s role, human review, access rights, and anti-retaliation protections, and provide contact information for a human representative. Upon request, employers must provide a meaningful description of the employee’s own data used by the system while protecting others’ personal information.
• Penalties: Violations carry a $500 civil penalty per violation, with enforcement by the Labor Commissioner or public prosecutors and potential injunctive relief, punitive damages, and reasonable attorneys’ fees and costs. Once an automated system’s use in a disciplinary or termination decision is shown, the employer bears the burden of proving it did not primarily rely on the system or that it satisfied the human-review and notice requirements.

This law may change before it takes effect. When Governor Newsom signed it on September 30, 2026, together with other workplace-technology bills, he noted that key definitions are missing and called for clarifying legislation.

California Workplace Bathroom Surveillance Location Restrictions (AB 1331), effective January 1, 2027, restricts employers from using workplace surveillance tools to monitor employees in workplace bathrooms, subject to specified exceptions.

• Who is covered: The law broadly covers California private and public employers, including state and local government employers.
• Prohibited monitoring: Employers generally may not use workplace surveillance tools to monitor employees in workplace bathrooms unless directed by a court order. The law preserves legally required uses and provides a limited exception for certain federally governed aircraft, national-security, military, space, or defense operations.
• Employee rights: Employees generally may leave surveillance tools behind when entering a workplace bathroom, except when legally required to remain available during meal or rest periods. One-time bathroom entry and exit checks are permitted. Exceptions also cover devices employees voluntarily bring into bathrooms and certain required identification, safety, or access devices that do not detect or record audio or video and have no physically embedded or attached AI.
• Penalties: Same enforcement framework and remedies as AB 1883, including penalties of up to $500 per violation and potential PAGA exposure.

This law may change before it takes effect. When Governor Newsom signed it on September 30, 2026, together with other workplace-technology bills, he noted that key definitions are missing and called for clarifying legislation.

California Worker Technological Displacement Act/WARN Revisions (SB 951), effective January 1, 2027, adds technology-displacement disclosures to required California Worker Adjustment and Retraining Notification (Cal/WARN) Act notices.

• Who is covered: The law applies to employers of covered industrial or commercial facilities, or parts of those facilities, in California that employ or have employed 75 or more persons within the preceding 12 months.
• Notice requirements: For a covered mass layoff (50 or more employees within 30 days), relocation, or termination caused wholly or substantially by AI or other technology replacing or automating positions, the required 60-day Cal/WARN notice must state “This notice is for a technology displacement” at the top. It must identify the number, classification or occupation, and work location of layoffs substantially due to that displacement; the affected workers’ job functions being automated; and the specific category or type of technology responsible.
• State reporting: The law tasks the California Employment Development Department (EDD) with publishing summaries of these disclosures online and tracking statewide automated displacement via a quarterly public report. It also mandates a legislative report on AI’s regional effects on business hiring practices due by January 1, 2028.
• Penalties: The existing Cal/WARN enforcement framework applies, including potential back-pay and benefits liability for employee-notice violations and civil penalties of up to $500 per day for government-notice violations, subject to statutory limits and exceptions. See Cal/WARN remedies.

Since March 2025, New York’s Department of Labor has also required employers filing a WARN layoff notice to say whether the layoffs were driven by technological innovation or automation, and if so, to specify the technology involved, such as AI or robotics.

This law may change before it takes effect. When Governor Newsom signed it on September 30, 2026, together with other workplace-technology bills, he noted that key definitions are missing and called for clarifying legislation.

Connecticut AI Responsibility and Transparency Act (SB 5 / Public Act No. 26-15): Distinguish the 2026 and 2027 requirements

Beginning October 1, 2026, use of automated employment decision technology is not a defense to discrimination complaints. Separately, WARN notices filed with the Connecticut Department of Labor must disclose whether the covered layoffs relate to the employer’s use of AI or another technological change. (See Public Act 26-15)

The Act’s developer-documentation and employer-notice provisions apply to covered technology deployed on or after October 1, 2027. Coverage extends beyond fully automated decisions to tools whose rankings, scores, or recommendations substantially influence hiring, promotion, discipline, or other employment decisions. Although employers cannot avoid responsibility by pointing to the technology, courts and the enforcement agency may consider anti-bias testing and other proactive prevention efforts.

Public Act No. 26-73 (SB 472), effective October 1, 2026

On June 4, 2026, Connecticut Governor Ned Lamont signed Public Act No. 26-73 (SB 472), which expands state restrictions on employer electronic monitoring effective October 1, 2026. The law repeals and replaces the existing monitoring statute (Conn. Gen. Stat. § 31-48d) and generally requires employers to provide advance written notice specifying the locations where monitoring may occur, with limited exceptions (for example, certain airport and security or safety settings). Civil penalties are $500 for a first violation, $1,000 for a second, and $3,000 for each subsequent violation. Furthermore, employers must provide new hires with a plain-language written statement detailing the types of workplace misconduct that could trigger unannounced surveillance. While the statute permits unannounced monitoring based on reasonable suspicion of illegal activity or a hostile work environment, employers must adjust their policies to meet the new disclosure standards.

The Connecticut Department of Labor offers an electronic monitoring poster. Employers should confirm that their notices and postings identify the required monitoring types and locations and separately provide the required new-hire statement.

Compliance required beginning January 1, 2027

As we reported in our Winter 2026 Quarterly Employment Law Update, businesses covered by the California Consumer Privacy Act that use covered automated decision-making technology (ADMT) for significant employment decisions must meet the applicable notice, opt-out or qualifying human-appeal, and access requirements under the CPPA regulations. Coverage and exceptions depend on the technology’s use and the decision involved. The regulations reach decisions about hiring, compensation, work assignments, promotion, and termination, rather than recruiting tools alone. Meaningful human involvement matters: a reviewer must understand and analyze the output and relevant information, and have authority to change the decision, rather than simply rubber-stamp a recommendation.

Monitor the final rules (SB 26-189/HB 26-1263) | Effective January 1, 2027

The Attorney General is accepting comments through October 26, 2026 on rules implementing the amended ADMT and chatbot laws, which become operative January 1, 2027, according to the official rulemaking page. The Attorney General released a revised interim draft on October 6, and the comment period may extend if the October 26 hearing is continued. Separately, xAI’s federal challenge to the law is pending, and enforcement is on hold until the court rules on xAI’s preliminary-injunction motion. The legislature substantially revised the original 2024 framework in May 2026, so compliance plans based on the earlier law should be revisited. The amended framework distinguishes developers from businesses deploying covered technology, making it relevant to companies that use third-party tools as well as those that build them. For more on the Act itself, see our Spring 2026 Quarterly Employment Law Update.

States are also examining AI’s broader effects on workers and public safety. California’s May 2026 workforce executive order (N-6-26) directs state agencies to study AI’s employment impacts and recommend Cal/WARN updates, while New York’s RAISE Act and Illinois’s AI Safety Measures Act impose safety and transparency obligations on certain large frontier-AI developers. Although these measures generally do not impose new requirements on employers simply using third-party AI tools, they highlight policymakers’ concerns about workforce disruption, accountability, and significant AI-related risks. We will continue to monitor how these priorities shape workplace regulation.

• AI in the Workplace: Legal Challenges and Best Practices (Webinar)
• 2026 AI Laws Update: Key Regulations and Practical Guidance (Client Insight)
• 2026 Employment Law Update (Webinar)
• Legislating the Future of AI in Employment: NYC’s Law on Automated Decision Tools & Other Important Developments (Client Insight)

On September 30, 2026, California Governor Newsom signed AB 1697, an amendment to California’s anti-stay-or-pay law, AB 692, that took effect immediately. As discussed in our Winter 2026 Quarterly Employment Law Update, AB 692 voided most training-repayment, sign-on bonus clawback, and relocation-repayment provisions in contracts entered into on or after January 1, 2026.

AB 1697 retroactively renders AB 692’s restrictions inoperative for all of 2026 and directs that claims arising during 2026 be treated as moot – providing relief under AB 692 for 2026 agreements, without eliminating restrictions under other applicable law. The restrictions will resume applying only to contracts entered on or after January 1, 2027, with a few changes to the exceptions. Most notably, the bonus exception no longer requires the agreement to be entered into at the outset of employment, which permits certain mid-employment retention bonuses. New exceptions also cover PTO advances of up to 40 hours and certain financial-services affiliation payments. Repayable bonuses must still meet strict conditions.

For covered contracts entered into on or after January 1, 2027, unlawful provisions are void, and workers or their representatives may sue for actual damages or $5,000 per worker, whichever is greater, plus injunctive relief and reasonable attorneys’ fees and costs.

Effective Date Under Review (December 19, 2026 vs. February 13, 2027)

As we reported in our Spring 2026 Update, New York’s amended Trapped at Work Act restricts certain employment-related repayment agreements. December 19, 2026, is a conservative planning target while the amended effective-date language is clarified. (Some practitioners read the amendment as fixing the effective date at December 19, 2026, while others believe it is February 13, 2027.)

(HB 1155): June 30, 2027 Void Date / October 1, 2027 Notice Deadline

As covered in our Spring 2026 Update, Washington’s near-total noncompete ban voids all existing noncompetes on June 30, 2027, regardless of when signed, and requires reasonable efforts by October 1, 2027 to notify current and former employees and independent contractors whose covered covenants remain within their effective period.

We will be updating the Contract Generator in the coming weeks to address these developments well in advance of their effective dates.

HB 5003 | Effective October 1, 2026

Employers with at least one Connecticut employee must include a good-faith wage range and a general description of benefits and other compensation in covered internal and external job postings beginning October 1, 2026. These requirements also cover out-of-state roles, including fully remote positions, reporting directly to a Connecticut supervisor, office, or worksite.

Employers with at least one Connecticut employee must also provide written notice of disability-accommodation rights upon hire beginning October 1, within 10 days after an employee reports a disability, and by January 29, 2027, for existing employees. Separately, employers with 100 or more employees must provide pay-code guides meeting the law’s content, language, and distribution requirements; compliant guides supplied by payroll providers may satisfy this obligation.

HB 1747 | Effective January 1, 2027

Washington’s amended Fair Chance Act phases in by employer size: employers with 15 or more employees became covered July 1, 2026, and employers with fewer than 15 become covered January 1, 2027. Covered employers must delay criminal background checks until after a conditional offer, conduct individualized assessments before adverse action, and provide required written notices.

Expanded job protection is already in effect

Since July 17, 2026, the New Jersey Family Leave Act covers employers with at least 15 employees worldwide, with employee eligibility generally requiring three months’ employment and 250 hours during the preceding 12 months, as explained in state guidance. Eligible Temporary Disability Insurance or Family Leave Insurance benefit recipients also have expanded reinstatement protections without an employer-size or current-employer tenure minimum, but benefit eligibility and statutory qualifications still apply.

Paid sick leave reaches smaller employers in January

Beginning January 1, 2027, most employers with at least one Connecticut employee become covered, completing the phased expansion. A compliant existing PTO policy may satisfy the law, and qualifying frontloading can avoid carryover requirements; covered employers also have notice and posting obligations, as explained in CTDOL’s FAQs.

Prepare payroll for January contributions

Family and Medical Leave Insurance (FAMLI) contributions begin January 1, 2027 at a combined 0.9% rate, generally 0.45% each for employer and employee; employers with fewer than 15 employees are exempt from the employer share under Maryland DOL guidance. Benefits follow in January 2028, rather than when contributions begin. Covered employers must register. Those seeking the initial State Plan remittance exemption through a private plan must submit a Declaration of Intent by November 15, 2026, with separate funding and approval requirements still applying.

Mobley v. Workday, Inc. (N.D. Cal., No. 3:23-cv-00770) – AI as an “agent” of employers

This case, which includes an ADEA age-discrimination collective, alleges that Workday’s AI-driven applicant screening tools systematically discriminate against candidates based on race, sex, age, and disability. It is a leading test case for whether third-party technology developers can be held directly liable under federal and state civil rights laws as “agents” of their employer clients. On June 22, 2026, the court largely denied Workday’s motion to dismiss the Third Amended Complaint, allowing the core race, age, disability, and California FEHA claims to proceed. It dismissed only one newly added plaintiff’s Asian American race-based disparate impact claim, on procedural grounds, along with the theory that Workday is liable as a direct employer. On September 14, 2026, plaintiffs filed a motion for class certification. The hearing is set for March 9, 2027.

Why it matters: The case tests whether AI vendors can be held liable as their employer clients' agents, which could shape how employers and vendors share responsibility for discrimination risk in AI-assisted hiring.

Kistler v. Eightfold AI Inc. (N.D. Cal., No. 4:26-cv-01768) – AI scores as “consumer reports”

Kistler v. Eightfold AI alleges that Eightfold’s AI hiring platform operated as a consumer reporting agency without complying with required consumer-reporting safeguards under the FCRA and California’s ICRAA. Eightfold’s motion to dismiss was fully briefed by July 2026 and taken under submission; no ruling had been issued as of early October 2026.

Why it matters: If AI candidate scores are treated as consumer reports, employers may need FCRA disclosures, authorizations, and pre-adverse-action notices before relying on them.

Doe v. Meta Platforms, Inc. (N.D. Cal., No. 3:26-cv-07122) – AI-assisted layoff selection

Filed July 13, 2026, by 26 current and former employees, this lawsuit alleges that Meta used AI-assisted tools in selecting workers for layoffs in ways that disadvantaged employees taking protected leave or needing accommodations. Meta disputes that characterization. On July 17, the court denied a temporary restraining order for lack of irreparable harm. At the August 24 preliminary-injunction hearing, Judge Orrick said the record did not persuade him on the merits and signaled a likely ruling for Meta; a written decision was pending as of this update. The merits will be decided in individual arbitration, with the court addressing only interim relief.

Why it matters: The case is a reminder to review how layoff-selection criteria treat protected leave and disability-related accommodations.

Boyd v. The Boston Beer Company, Inc. (D. Mass., No. 1:25-cv-13618) – Noncompete consideration under the Massachusetts Noncompetition Agreement Act

Former Boston Beer sales representatives allege that a flat $3,000 noncompete consideration payment – less than 5% of base salary – does not satisfy the Massachusetts Noncompetition Agreement Act’s requirement for garden leave or “other mutually-agreed upon consideration.” The Massachusetts Legislature left Governor Healey’s proposed noncompete reforms out of its late-summer economic development package, so the meaning of “other mutually-agreed upon consideration” remains for the courts to decide.

Why it matters: The case could affect employers that rely on fixed cash payments, rather than garden leave, as consideration for noncompetes.