Compliance Corner [May 2026]
Here is what is new in May 2025
AI Displacement Anticipated
Marijuana Testing Continues at HHS
What Counts as Discrimination Is Not Always Clear
New Compliance Requirement for Government Contractors
Expensive Jury Verdicts for Hostile Work Environments
DOL Opening Up Options for 401(k) Investments?
Virginia Legal “Snapshot
AI Displacement Anticipated
The Minnesota House of Representatives is currently debating a bill that would require employers to provide at least 90 days’ notice to employees whose positions are in danger of being lost to AI. Per online sources, “If passed, HF4369 would require ‘notice and a transitional employment period for employees displaced by artificial intelligence.’ It would require that employers provide a 90-day notice before deploying technology that could displace jobs as well as an opportunity for employees to upskill or reskill.” Conviction of non-compliance would lead to double-barreled consequences: a fine of up to $10,000 per employee plus loss of ability to bid on state contracts. It is noted that about 33% of jobs in Minnesota are susceptible to AI replacement, with an additional 4% having “very high exposure.” It is pointed out that this level of threat to Minnesota workers is the highest in the Midwest, and tenth nationwide, hence the pressure to enact this regulation. This legislation is above the federal WARN Act, and it is expected that more states will enact their own versions as well.
Marijuana Testing Continues at HHS
While the federal classification of marijuana has been downgraded from Schedule I to Schedule III, HHS has announced it will continue testing applicants for its “metabolites” as well as for other drugs for which it is already testing. While 24 states have legalized marijuana, most still permit testing for it; what is allowable discipline varies among those states. The general advice to HR departments is to maintain existing policies because most state regulations permit employers to not allow on-the-job use and/or impairment. The classification as “Schedule III” still means that marijuana continues to be classified as a controlled substance by the federal government.
What Counts as Discrimination Is Not Always Clear
Recent court cases have shed what may be “new light” on discrimination:
The 4th Circuit Court found that a healthcare worker had been discriminated against when an initial exemption (for childbirth & lactation) from the COVID-19 vaccine had been revoked when the employee requested that it be continued because her “sincerely-held religious convictions” countermanded the vaccination. Denial was therefore improper.
An appeals court in California found that a female flight attendant who posed “suggestively” in her uniform on her “OnlyFans” website was improperly terminated. She claimed she had been subjected to sex discrimination and harassment “for years” and then was fired even though three male co-workers were not fired for “similar social media activity.” A lower court had disagreed with her, but that verdict was reversed by the Appeals Court.
New Compliance Requirement for Government Contractors
As of April 25, 2026,the deadline set by the Administration for a “DEI Prohibited” clause to be inserted in ALL federal government contracts, subcontracts, and sub-subcontracts. The Federal Register announcement is online at https://www.federalregister.gov/documents/2026/03/31/2026-06286/addressing-dei-discrimination-by-federal-contractors.
Expensive Jury Verdicts for Hostile Work Environments
Jury verdicts in three separate instances cost employers dearly for failing to address hostile work environment claims:
A driver for Cemex in California who had a congenital ear problem was terminated because he could not obtain a federal driving permit because of his medical condition. However, prior to his termination, he had been the victim of numerous insults and slurs from co-workers and had filed several complaints with HR. No action was taken, so he sued for harassment after his termination and included the termination in the lawsuit. The court dismissed the termination claim because of the permit, but permitted the harassment claim. A jury awarded him $5 million for the maltreatment and company’s failure to act.
In Utah, a jury awarded an HR professional over $5 million for harassment that was ignored by the employer’s HR executive.
Some time ago, another California jury awarded a female employee of Liberty Mutual $103 million for hostile work environment and age discrimination.
Updates will be provided as they become available.
DOL Opening Up Options for 401(k) Investments?
The DOL has proposed a new rule easing 401(k) investments in cryptocurrency and other alternative assets. The rule, which follows the direction of an executive order, would protect fiduciaries who select such investments “objectively, thoroughly, and analytically,” the department said. It would both clarify a fiduciary’s duty of prudence under the Employee Retirement Income Security Act and provide safe harbor for “alternative assets” such as those above and private market investments, real estate, commodities and other investments. The DOL proposal includes six factors to be evaluated: performance, fees, liquidity, valuation, benchmarking and complexity. Employers observing those are presumed “reasonable and entitled to significant deference.”
Virginia Legal “Snapshot
The Virginia Court of Appeals has ruled that employees who are “low-wage workers” cannot be bound by non-solicitation agreements. Employers currently using these are advised to use alternate means to shield their employees; these could include changes in compensation scales, employment agreements, etc. Virginia Senate Bill 170 reinforces this concept, particularly for employees terminated without cause (i.e., at-will) unless severance is provided; it would be effective July 1, 2026.
Virginia Senate Bill 199/House Bill 5 would extend paid sick leave requirements to virtually all employees.
Virginia Senate Bill 2/House Bill 1207 would create a Virginia version of FMLA. Premiums from payroll deduction would start July 1, 2028; benefits would begin January 1, 2029.
Senate Bill 25/House Bill 636 would not allow employers from using salary history in making offers or other compensation decisions, or in making a decision to “Refuse to interview, hire, employ, promote, or otherwise retaliate(e) against employees who refuse to provide their salary history.”