Welcome to the latest edition of AlphaStaffHCM’s Monthly Compliance Updates!
We are pleased to provide you with this Part 1 Winter 2025 edition of the AlphaAdvisor featuring federal and state legal updates. This edition features guidance on 2026 implementation for compliance with the One Big Beautiful Bill Act (OBBBA), wage and hour laws, 401(k) rules, and includes highlighted resources provided by some of AlphaStaffHCM’s trusted legal partners, to guide and help keep you in compliance.
Note: The information contained in this Compliance Update should not be relied upon as legal advice.
Federal Law Updates
Automatic Extension for Employment Authorization Document Renewals: Terminated
United States Citizenship and Immigration Services (USCIS) has terminated the long-standing practice of automatic extensions of Employment Authorization Documents (EADs) for most applicants upon renewal while new EAD is pending. On October 29, 2025, the Department of Homeland Security (DHS) published an interim final rule making the change effective immediately. The rule applies to all EAD extensions filed on or after October 30, 2025. Employers will want to take quick action to identify employees working pursuant to an EAD and be prepared to file for renewal as soon as possible, so that the new EAD arrives prior to expiration. Employers will also want to monitor EAD deadlines closely and notify employees of upcoming expirations many months in advance.
Unfortunately, USCIS only allows for EAD extensions to be filed 180 days prior to the current expiration. Currently, processing times for EADs have a significant range with some categories taking well over 180 days for USCIS to adjudicate. Due to the removal of automatic extension while an EAD renewal application is pending, employers should be prepared to find that current employees may be unable to continue their work while USCIS processes their EAD extension/renewal despite applying 180 in advance. Read more here.
Clarification for H-1B Visas $100k Fee
USCIS has provided clarification on how the $100,000 fee for H-1B visas applies. The new guidance offers significant relief for employers sponsoring workers already in the U.S. The $100,000 fee does not apply to:
- Recent international graduates in F-1 status applying for a change to H-1B.
- Current H-1B holders applying for an amendment, change of employer, or extension.
- Workers departing and reentering the U.S. later on an existing, valid H-1B visa.
- Petitions filed before September 21, 2025.
Employers hiring foreign professionals already in the country – especially through university pipelines – do not have to pay the fee. Most existing workers are unaffected and only new hires outside the U.S. are subject to the $100,000 fee. Read more about key takeaways, impact on hiring, and payment here.
IRS Roth Cost of Living Increases and Implementation of “Super Catch-Up”
As a reminder, beginning in 2025 participants aged 50 and older have been able to make an annual catch-up contribution over and above the regular limit. The maximum annual “super catch-up” contribution for 2025 is $7,500. Employees who are ages 60 through 63 will be allowed to contribute “super catch-up” contributions of up to $10,000 or 150% of the regular catch-up limit. Read more here.
Employers and plan sponsors should also review and be aware of the newly issued IRS cost-of-living adjustments (COLAs) to the contribution and compensation limits for tax-qualified retirement plans. Review the COLAs here, and note the important/surprising changes discussed by Ogletree Deakins.
Lastly, for a full guide on 401(k) contributions and pre-tax savings for healthcare expenses related to the ACA (Affordable Care Act), penalty amounts and more, review Fisher Phillips’ Employer Cheat Sheet for Retirement and Health Plan Limits in 2026 here.
OBBBA Updates and Tax Benefits for Small Employers
Research and development (R&D) costs for domestic activities can now be deducted immediately, rather than spread over five years. Eligible small businesses can also accelerate deductions for R&D expenses from 2022-2024 that were previously required to be amortized, but this would require amended returns and would subject the taxpayer to the fully restored IRS section 280C. An eligible small business has average annual gross receipts of $31 million or less. Small business owners can read official correspondence and guidance from the IRS here, and should plan to discuss with their CPA and/or tax consultant.
AlphaStaffHCM and OBBBA:
AlphaStaffHCM previously advised on the passage of OBBBA here. With 2026 on the horizon and Forms W-2 being issued in the early months of 2026, AlphaStaffHCM is implementing changes for all clients for whom we run payroll. Per IRS guidance, in 2026 a new Form W-4 and new Form W-2 will be provided to account for employee deductions on Qualified Overtime and Qualified Tips under OBBBA. AlphaStaffHCM will provide employer and worksite employee guidance regarding these changes and compliance with a special AlphaAlert.
Read more on the IRS’s latest updates and how employers may comply with OBBBA for 2025 and plan ahead for 2026 here.
Recent Federal Ruling Imputes $2M Wage and Hour Liability to Managing Director
It is important for employers, owners, managers, and senior leadership to know that they can be found personally liable for wage and hour violations. A recent class-action lawsuit in federal court in New Jersey involved 18 former employees alleging wage violations of the Fair Labor Standards Act (FLSA) and the New Jersey Wage Hour Law (NJWHL). The U.S. District Court judge held that the managing director of a pawn shop was an “employer” within the meaning of the FLSA and NJWHL. The court also found that the director violated federal and state wage and hour laws by knowingly misclassifying employees, lowering their salaries without notice, failing to pay them minimum hourly wages and overtime premiums, failing to timely pay his employees, and ignoring his CFO’s warning about unpaid wages. Although an extreme example of willful violations, this case serves as a stark reminder that owners, executives, managers and others who control payroll practices or employee working conditions can face personal exposure for unpaid wages, penalties (such as double or triple damages), and attorneys’ fees and costs. Read more about the case here, and heed Fisher Phillips 6 steps on how employers can protect themselves.
Recent Wage and Hour Law Ruling from U.S. Court of Appeals Results in $22M in Unpaid Wages Verdict
United States Third Circuit Court of Appeals ruled that a manufacturer employer had to pay hourly employees for the actual time they spent completing activities, not just the reasonable time it should take to finish assigned tasks like showering after handling chemicals, changing into protective gear, etc. The employer appealed and argued that federal courts are split on the proper legal standard. The Supreme Court of the United States declined to review the case and declined to set forth binding case law on the issue. As a result, the Third Circuit’s decision stands, and the employer is liable for the multi-million-dollar award. Employers should remember to train managers on wage and hour laws like these, and audit policies for actual time versus reasonable time. Read more about what steps employers can take to avoid wage and hour liability here.
State Updates
California New “Know Your Rights” Law and ICE Emergency Contact
Effective January 1, 2026, employers must provide all employees with the new “Know Your Rights” notice by February 1, 2026. The California Labor Commissioner is tasked with providing employers with the new template by January 1, 2026. The Know Your Rights notice must be given upon hire and annually to all current employees. Read more about how employers can comply and avoid civil violations and penalties here.
Notably, in response to current political climate on immigration, under the new law employers must also allow employees to designate an emergency contact to be notified if the employee is arrested or detained at work or during work hours, and the employer has actual knowledge of the event. This part of the law must be implemented with all current employees by . Employers should plan to revise their emergency contact forms and train managers on how to respond to a workplace arrest pursuant to this new law. Read more about compliance advice from Fisher Phillips here.
AlphaStaffHCM Action Item: For our clients, AlphaStaffHCM will assist with updating new hire packets and will provide the notice for annual distribution once released.
California 2025 Legislature Round Up
New laws taking effect January 1, 2026:
- Stay or pay clauses: This law bans employment contracts that require the worker to repay an employer, training provider, or debt collector for a debt (such as training costs) if the worker’s employment ends. The law does not apply to retention bonuses and certain loans if certain conditions are satisfied.
- Pay data reporting: This law requires employers to store pay equity data, including demographic information related to race, ethnicity, or gender, separately from personnel records. It also creates a civil penalty for employers that fail to submit pay data reports to the California Civil Rights Department.
- Post-emergency reinstatement rights: This law extends the COVID-era reinstatement rights law covering employees laid off due to any state or locally declared emergency to January 1, 2027. The law covers certain airport service and hospitality providers, building service providers, hotels, private clubs, and event centers.
- Maintaining personnel records: This law requires employers to include these items in education or training records: the name of the employee, the name of the training provider, the duration and date of the training, the core competencies or skills in the training, and the resulting certification or qualification.
- Expanded paid family leave: This law expands eligibility for benefits under the state’s paid family leave program to include individuals who take time off work to care for seriously ill designated persons. The law defines “designated person” to mean “any care recipient related by blood or whose association with the individual is the equivalent of a family relationship.”
- Pay transparency requirements: For California Labor Code actions under Section 1197.5 the statute of limitations will be three years after the last discriminatory pay act occurred and expands the look-back period for relief to ten years. The law clarifies that “pay scale,” for the purposes of job-posting disclosures, means “the salary or hourly wage range that the employer reasonably expects to pay for the position upon hire.” The law also defines wages to include stock options and other forms of compensation not previously specified in the law. As a reminder, California Pay Transparency law became effective January 1, 2023, and mandated that employers provide transparency in job listings, but also implemented wage reporting across race and sex classes. Read more about the original law, here.
- Tip theft: The Labor Commissioner will now be able to investigate and issue citations or file civil lawsuits for gratuities taken or withheld in violation of the California Labor Code.
- Reimbursement of work expenses: The law requires an employer to reimburse an employee for the use, upkeep, and depreciation of a truck, tractor, trailer, or other commercial vehicle the employee owned and used for work.
Read about more laws becoming effective January 1, 2026 and vetoed bills here.
Illinois Amends Nursing Mothers in the Workplace Act
Effective January 1, 2026, Illinois employers must give nursing mothers paid breaks as required by the Act. Breaks must be paid at the employee’s regular rate of compensation, unless doing so would create an “undue hardship” as defined in the Illinois Human Rights Act (IHRA). The amendment also prohibits employers from requiring employees to use paid leave (like PTO) for breaks required by the Act or from otherwise reducing a nursing employee’s compensation during the break time. Employers should review and revise their lactation/nursing mother accommodation policies to ensure compliance with these upcoming requirements as well as the federal PUMP for Nursing Mothers Act (PUMP Act) and Pregnant Workers Fairness Act, requiring reasonable accommodations. Read more about how employers should comply here.
Maine’s New Law Requires Updated Wage and Hour Practices
As of late September 2025, employers with 10 or more employees will be required to pay employees for “showing up.” If an employee reports to work for a scheduled shift and the employer cancels or reduces their scheduled shift, the employee must be paid either: (1) two hours of pay at the employee’s regular hourly rate of pay, or (2) the total pay for the shift for which the employee was initially scheduled, whichever is less. There are exceptions such as extreme weather conditions, civil emergency, and injury/illness. Employers violating this law may be subject to a fine of $100 to $500 per violation. Employers will need to enforce this timekeeping practice to avoid penalties; however, the statute does not create a private right of action for employees. Read more about how Maine employers can comply with the new law here.
AlphaStaffHCM Action Item: For our clients, AlphaStaffHCM will assist with updating employee handbooks/company policies to account for the new wage and hour practices.
Oregon Pay Equity
Oregon has passed new law emphasizing protected class categories for pay discrimination, including an individual’s race, color, religion, sex, sexual orientation, national origin, marital status, juvenile record, etc. Accordingly, effective January 1, 2026, employers must disclose payroll codes used for pay rates and deductions with detailed descriptions and definitions of each code, pay rates that the employee may be eligible for, the purpose of these deductions, allowances and benefits that may appear on the itemized statements as contributions and deductions.
Read more here.
AlphaStaffHCM Action Item: For our clients, AlphaStaffHCM will assist with providing the Oregon Bureau of Labor and Industries sample notice, and instructions on how to modify the notice.
Puerto Rico’s Statutory Christmas Bonus
As a reminder, since 1969, Puerto Rico has had a statutory Christmas bonus calculation for employees hired prior to January 26, 2017, and then a different calculation for those hired on or after January 26, 2017. Both versions are capped at $300 for employers with under 15 employees (prior to January 26, 2017) and for employers with up to 20 employees on or after January 26, 2017. The bonus must be received by December 15, 2025. Read more about the exact calculations and how to plead exemption here.
Puerto Rico OSHA Penalties Increased
Puerto Rico employers should be aware Puerto Rico Occupational Safety and Health Administration (PR OSHA) has increased penalty amounts for workplace safety violations. The new penalty structure ensures consistency with federal OSHA enforcement standards. Employers should plan to work on strengthening workplace safety programs, verifying postings, and implementing prompt corrective action to help reduce exposure under the new penalty framework. Review the updated penalty amounts here.
Rhode Island New Wages Notices
Effective January 1, 2026, Rhode Island employers will have to provide new employees with a written notice detailing payment information. The notice must include the employee’s pay, allowances, deductions, pay schedule, and employment status (exempt), as well as the employer’s name, address, and contact information. Leave policies also need to be included, and the law is clear that the documents cannot be pulled from handbooks or other places but require being compiled into a single notice. Employers must retain a signed copy of the notice from each employee acknowledging receipt. Employers should plan to develop a single notice document and incorporate same into their onboarding documents. Read more about how to comply here.
State Minimum Wage Updates
A comprehensive 2026 wage update from Littler Mendelson includes minimum wage rate increases for non-exempt (including tipped) employees effective January 1, 2026, and lists increases to exempt employee pay resulting from minimum wage increases on January 1, 2026. Below we have summarized additional changes to state exempt classifications:
California:
- Exempt computer employees’ minimum hourly rate will increase to $58.85, minimum monthly salary will increase to $10,214.44, and the minimum annual salary will increase to $122,573.13.
- Exempt instructors at non-profit private higher education institutions must be paid a monthly salary equivalent to no less than twice the state minimum wage for a 40-hour workweek or, when employed per course or per laboratory, they receive a minimum payment per “classroom hour”; in 2026, that rate will increase to $152.10 per hour.
- Minimum hourly rate that licensed physicians and surgeons must receive will increase to $107.17 per hour.
- Inside Sales retail/service establishment exemption requires pay equal to 1.5 times the state minimum wage.
Colorado:
- Exempt computer employees must receive at least the lesser of the applicable $1,111.23 weekly salary or hourly pay that in 2026 increases to at least $34.85 (technically “proposed” but expected to be the “final” rate).
- Highly compensated employees’ annual salary must equal at least 2.25 times the rounded annual salary, which will increase to $130,014 (technically “proposed” but expected to be the “final” rate).
- Inside Sales retail/service establishment exemption requires pay equal to 1.5 time the state minimum wage.
Connecticut:
- Inside sales retail/service establishment exemption requires pay equal to 2 times the state minimum wage.
Minnesota:
- Inside sales retail/service establishment exemption requires pay equal to 1.5 times the state minimum wage.
Washington:
- Exempt computer employees hourly pay will increase to $59.96.
- Inside sales retail/service establishment exemption requires pay equal to 1.5 times the state minimum wage.
To review the complete charts and increases on wages, read more here.
AlphaStaffHCM Action Item: For our clients, AlphaStaffHCM will automatically follow and increase state/federal minimum wage laws; however, it is important for employers to track state increases to minimum wage to determine correct classification for exempt employees and continued eligibility.