HR’s Watchlist - Getting Closer to 2027
As we head into the final months of 2026, HR professionals continue to face a rapidly evolving employment law landscape. While employers continue to navigate familiar compliance issues such as wage and hour requirements, paid leave expansion, and worker classification rules, one trend stands above the rest: the increasing regulation of artificial intelligence in hiring decisions and day-to-day operations.
For organizations operating across multiple states, the challenge is no longer whether AI-related employment laws will affect HR operations, but how quickly can organizations adapt their recruiting, performance management, and workforce planning practices to remain compliant. Recent developments in states such as Colorado, Connecticut, Illinois, and New York demonstrate that lawmakers are increasingly focused on ensuring that AI-driven employment decisions remain fair, transparent, and free from discrimination.
AI Regulation Becomes a Core HR Compliance Issue
Many employers are now relying on AI in recruiting technology in some capacity to perform functions such as screening applicants, ranking candidates, identifying promotion opportunities, or evaluating employee performance. While these tools can improve efficiency, concerns, and even legal action has arisen, programming bias and the potential for automated systems to unintentionally discriminate against protected groups.
Connecticut's AI Requirements Expand in 2026 and 2027
Connecticut recently signed into law one of the most comprehensive AI regulations in the country. Beginning October 1, 2026, employers may not rely on AI as a defense against discrimination claims and will face additional transparency obligations regarding certain employment decisions. Further requirements become effective in 2027, including advanced written notice requirements before employers use automated decision-making tools in hiring, promotion, discipline, or termination decisions. Employers will also need to ensure individuals understand when AI is influencing employment-related outcomes.
Colorado Refocuses Its AI Compliance Framework
Colorado's original AI law, originally passed in 2024, generated significant concern among employers. In 2026, lawmakers revised the guidance, replacing some of the original compliance obligations with a better-defined outline of how to provide transparency, updates on the notice requirements, more human oversight, and enhanced employee protections. The revised law is scheduled to take effect January 1, 2027. Employers utilizing automated hiring tools, or AI-assisted employment decisions should begin evaluating their systems now.
Illinois Continues to Expand AI Employment Protections
Illinois continues to expand on AI regulations, becoming a state leader in AI regulations over the last several years. Effective January 1, 2026, amendments to the Illinois Human Rights Act treat discriminatory use of AI in employment decisions as potential civil rights violations. This opens up employers for risk when considering the usage of AI, as it means that discriminatory outcomes produced by automated systems carries the same risk as if it were discriminatory actions taken directly by managers. Illinois regulators continue to evaluate additional guidance regarding notice and disclosure requirements.
What This Means for Midwest Employers
Although Iowa, Minnesota, and Wisconsin have not enacted comprehensive AI employment laws comparable to Colorado or Connecticut, organizations operating in these states should not assume they are free from any risk when it comes to exploring AI usage in the HR space.
Federal anti-discrimination laws continue to apply regardless of whether employment decisions are made by a person or a program. The Equal Employment Opportunity Commission (EEOC) continues to state that employers remain responsible for ensuring AI tools do not create disparate impacts on protected groups. As additional states adopt AI regulations, multi-state employers may find it best to implement consistent, nationwide standards for AI governance rather than managing separate compliance frameworks based on multi-state operations on a case-by-case basis.
Other Employment Law Developments to Watch
While AI regulation is likely to dominate HR compliance discussions through 2027, employers should also keep an eye on several other significant employment law trends:
Expanded Paid Family & Medical Leave (PFML): States such as Minnesota and Delaware continue expanding paid leave programs, adding to the growing list of state-specific leave requirements that employers must keep an eye on.
Wage and Hour Compliance: Anticipated increases to federal overtime exemption salary thresholds, along with ongoing state minimum wage increases, may require employers to reevaluate exempt classifications, compensation structures, and payroll practices.
Restrictions on Non-Compete Agreements: Several states are limiting employers' ability to use non-compete agreements, training repayment provisions, and other arrangements that restrict employee career growth and freedoms. These restrictions are expected to continue expanding into 2027.
PWFA Enforcement: Employers should expect continued scrutiny regarding compliance with the Pregnant Workers Fairness Act (PWFA), particularly related to accommodation requests and documentation practices.
Labor Law Posting and Policy Updates: Regular reviews of required federal, state, and local labor law posters, employee handbooks, leave policies, and accommodation procedures remain essential to maintaining compliance in an evolving regulatory environment.
As employment law continues evolving at the federal and state levels, HR leaders should partner closely with their HR Consultant to ensure workplace policies, technology practices, and employee communications remain compliant. The rise of AI usage and legal regulations, in combination with employment decisions, and workplace compliance will likely remain at the forefront of HR for the foreseeable future.
How Skywalk Group Can Help
Skywalk Group can help employers turn these evolving requirements into practical, manageable action. Our HR consultants can review current policies and practices, assess the use of AI in employment decisions, identify compliance gaps, update handbooks and employee communications, and support leaders as they implement consistent processes across locations. By partnering with Skywalk Group, organizations can stay ahead of regulatory changes while building fair, compliant, and people-focused workplaces.
By: Delaney Dehnke
Additional Sources: Mayer Brown Employment Law Update (2026), Epstein Becker Green Workplace AI Regulation Update (2026), Husch Blackwell AI Governance Update (2026), K&L Gates AI Employment Landscape Report (2026)