Compliance complexity: How employers can cope with an increasingly fractured state-law patchwork

Employers today face a rapidly evolving compliance landscape that presents unprecedented challenges.

Notably, the federal government has withdrawn guidance previously relied upon by employers to navigate their employment law obligations. Meanwhile, states have started to fill these gaps by enacting laws that provide greater protections to workers. 

The states are tackling emerging issues facing employers, such as: data privacy; systemic discrimination risk from the use of AI tool use; paid or unpaid sick leave; parental leaves and other leaves; or protecting vulnerable workers. 

Some multi-state employers may choose to address this dichotomy by enacting workplace policies that meet the most generous statutory endowment, which can substantially increase costs of compliance. Other employers may choose to have an individualized approach to workplace norms and benefits that vary from state to state. However, the latter approach may result in certain employees of the company feeling disadvantaged from peers located in other states, leading to morale issues as well as compliance burdens.

While many states have long provided more expansive employment protections, the difference today is that some of the federal withdrawals may result in conflict with more expansive state laws, causing additional compliance headaches.  Multi-state employers now confront a complex patchwork of requirements that demand careful attention and strategic planning. Some of the decisions for navigating this terrain may also inadvertently make the employer a target for federal investigation or enforcement.

Federal guidance withdrawals: A retreating framework

Recent federal actions illustrate a significant shift away from expansive agency guidance. The U.S. Equal Employment Opportunity Commission and U.S. Department of Labor have withdrawn or updated multiple documents that employers relied upon for compliance direction.

Harassment guidance

The EEOC recently rescinded its 2024 Enforcement Guidance on Harassment in the Workplace without any public input. The commission previously approved this guidance only after receiving tens of thousands of public comments. Employers that structured policies around this comprehensive guidance must now reconsider their approach to preventing and addressing workplace harassment.

AI and employment decision-making

The EEOC also removed guidance published in May 2023 that addressed how federal anti-discrimination law applies to employers’ use of artificial intelligence in hiring, firing and promotion decisions. Employers implementing AI-driven hiring tools now lack clear federal guidance on compliance with Title VII and other employment discrimination statutes. Meanwhile, class-action lawsuits, such as Mobley v. Workday, Inc., seek to make employers liable for alleged bias in third-party vendor AI software. 

States such as California, Illinois and Colorado that enacted AI regulations may find themselves at odds with an executive order, “Ensuring a National Policy Framework for Artificial Intelligence,” directing the Commerce Department to identify “onerous” laws conflicting with the executive branch’s minimal intervention policy.

 LGBTQ protections

Multiple pages of resources related to protections following the Supreme Court’s decision in Bostock v. Clayton County were quietly removed from the EEOC website. This action creates uncertainty for employers navigating discrimination claims based on sexual orientation and gender identity, which are still protected under Title VII and several states’ laws.

AI hiring framework

DOL noted that its “AI & Inclusive Hiring Framework” published in September 2024 may be outdated or not reflective of current policies. The framework provided employers with guidance on combating algorithmic bias. Likewise, the DOL’s October 2024 “Artificial Intelligence Best Practices” guidance is similarly flagged as potentially outdated, and the document is no longer accessible in certain locations.

Pregnant Workers Fairness Act

The EEOC issued a final rule to implement the Pregnant Workers Fairness Act on April 15, 2024, with the regulation effective on June 18, 2024. While the regulations have not been officially rescinded or withdrawn, they are currently under challenge. Such actions create uncertainty and ambiguity for employers who seek to comply with the law. It also adds confusion to litigants and courts that may be grappling with lawsuits alleging violations of the act. 

In May 2025, a federal judge in Louisiana vacated portions of the regulations holding that the EEOC exceeded its authority. Similarly, a court in North Dakota enjoined enforcement of the PWFA’s regulations regarding abortion, infertility and IVF accommodations with respect to certain employers.

EEOC Chair Andrea Lucas also has made clear she intends to scrap the rules.

State law expansions: Filling the void

As federal guidance contracts, states act to ensure employees receive protections that federal authorities no longer prioritize. This activity creates significant compliance burdens for employers operating in multiple jurisdictions. It may also cause challenges to federal contractors who must comply with federal rules that may conflict with state laws that they are also obligated to follow.

Many states enacted new employment protections during 2024 and early 2025, focusing on paid leave expansion, whistleblower protections, pay transparency, criminal history inquiries and workplace safety. For example, New Jersey has expanded its Family Leave Act to cover employers with 15 or more employees, wherever located. Its federal counterpart, the Family and Medical Leave Act, applies to employers with 50 or more employees in a 75-mile radius of employee locations. As one can see, the change to New Jersey leave impacts many more small employers, or even employers who may have only one employee working in that state. 

Some of the new laws focus on creating greater employee protections. For example, California has extended discrimination protection based on “intersectionality” — meaning discrimination on the basis of two or more protected characteristics. California is the first state to codify this protection. Illinois has added “family caregiver” as a protected characteristic under its Human Rights Act. Now caregivers are protected from discrimination on this status in hiring, firing and terms and conditions of employment. 

This means that multi-state employers confront a compliance landscape that grows more fractured daily, and may conflict with practices that federal agencies once endorsed. Employers must navigate the potential for conflict while still complying with state laws that diverge from federal enforcement policies.

Divergent standards create operational challenges

An employer might develop one harassment prevention policy for California that incorporates protections the EEOC rescinded, another for states following prior federal guidance and yet another for jurisdictions that never adopted the withdrawn standards. This fragmentation demands separate training programs, distinct reporting procedures and jurisdiction-specific investigation protocols.

Consider an employer using AI in hiring. Federal AI guidance is disappearing while California, Illinois and other states impose specific requirements. Employers must navigate state-by-state variations without federal direction, creating compliance costs that disproportionately affect organizations without sophisticated legal departments.

Leave administration becomes increasingly complex

Family and medical leave demonstrates the patchwork’s practical impact most acutely. Some states have their own family or medical leaves that may apply, depending upon the size of the employer. Most leave laws require employers to provide unpaid leave and job restoration guarantees, and refrain from retaliation. Some state laws may run concurrently with the FMLA; others may be in addition to FMLA leave, greatly expanding the time an employee may be away from the workplace. Also, several states have their own paid benefit program for employees who take leaves under state laws that an employer must coordinate with paid time off, sick leave, state paid sick leave laws, and other factors.

An employer with operations in New Jersey, California, Delaware and Connecticut, for example, must track different employer size thresholds, employee eligibility requirements, leave entitlements, wage replacement provisions and job protection guarantees.

Each jurisdiction coordinates leave benefits differently from the FMLA, requiring employers to determine which leaves run concurrently and which provide separate entitlements.

Policy harmonization becomes elusive

Employers traditionally sought to implement uniform nationwide policies that meet the highest standard, ensuring compliance everywhere. This approach grows increasingly untenable.

States enact laws that conflict not just in degree but in kind. Some states prohibit discrimination based on intersectionality or LGBTQ+ status while federal enforcement retreats from single-characteristic disparate impact claims and transgender or gender identity protections.

Administrative burdens escalate

Every state that expands protections requires employers to revise handbooks, update training materials, modify HR systems and educate managers. When federal guidance disappears simultaneously, and the states fail to provide guidance on the new laws, employers must determine which standards to maintain and which to abandon, how to interpret the new requirements without the benefit of interpretation documents or a body of case law.

HR departments strain to track which employees fall under which laws, which forms apply in which states and which posting requirements govern which locations. Small and mid-sized employers that lack dedicated compliance staff face particularly acute challenges. And that challenge can become more problematic with employees who work remotely in states different from employer locations.

Prudent employers may wish to establish best practices for addressing the patchwork problem.

Recommendations for employers

Conduct jurisdiction-specific audits. Review policies, handbooks and practices in each state where you operate. Identify gaps created by federal guidance withdrawals and new state law requirements.

Implement robust tracking systems. Invest in HR technology that tracks different requirements across jurisdictions, particularly for leave administration, discrimination protections and hiring practices.

Develop state-specific training. Create training programs tailored to each state’s requirements rather than relying on one-size-fits-all materials that may no longer reflect the legal landscape.

Monitor state legislative activity. Establish processes to track pending state legislation and anticipate changes before they take effect.

Maintain federal standards where appropriate. Consider whether withdrawn federal guidance still represents “best practices” even absent enforcement priorities. Some protections may exceed legal requirements, which are a floor, but serve legitimate business interests.

Document decision-making. When choosing between competing standards or determining policy approaches in light of guidance withdrawals, document the reasoning behind your decisions.

Seek specialized counsel. Partner with employment counsel and experienced HR professionals who understand both the withdrawn federal framework and emerging state requirements to navigate this complex landscape strategically.

The simultaneous withdrawal of federal guidance and expansion of state protections creates unprecedented compliance challenges for multi-state employers. Organizations may be well served by moving away from reliance on uniform nationwide policies and embrace jurisdiction-specific approaches that reflect the divergent regulatory landscape. Or, alternatively, they may create nationwide policies that comply with the strictest state law compliance requirements. But either choice comes with burdens and benefits.

Proactive employers who invest in comprehensive audits, robust tracking systems, and specialized training will navigate this patchwork more successfully than those who react to problems as they arise. The complexity will not diminish in the near term; employers are urged to act proactively and continue to monitor developments.