5 Key Employment Law Changes for 2025

Each year, new state and local regulations take effect, and with a new administration coming into power, 2025 is set to bring significant changes for businesses of all sizes. 

Below are 5 key changes that employers should be ready for this year.

 

 

1. Rising Minimum Wages

In 2025, many states, cities, and counties will implement minimum wage increases, with nearly 80% of these areas setting rates at $15 or higher. While larger companies may opt for a unified pay structure across states, smaller businesses operating on tighter budgets may face challenges.

Multi state companies have two main strategies to comply with new minimum wage laws. A "hyper-local approach" involves ensuring that each job aligns with the specific minimum wage requirements of its state. Alternatively, businesses can take a holistic approach by setting a single pay range for all employees nationwide. By aligning the pay rate with the highest state minimum wage in which they operate, employers ensure consistency across their workforce, regardless of state. The latter approach is often recommended, as it enables organizations to maintain a consistent message, reinforce their values, and take control of the compensation narrative; however, smaller businesses may face challenges in adopting this strategy due to limited resources.

For more information regarding minimum wage rates, check out our blog on the FLSA and its mandates here.

 

2. Overtime Pay Uncertainty

The threshold for overtime pay eligibility determines the salary level at which employees are entitled to overtime pay for hours worked beyond the standard 40-hour workweek. Typically, non-exempt employees earning below this threshold must receive overtime compensation at a rate of 1.5 times their regular hourly wage for any hours worked over 40 in a week.

In 2024, a federal court ruling increased the overtime pay threshold to $844 per week, with a second increase planned for $1,128 starting in 2025. However, both instances were blocked by a federal court, which nullified the increases and reverted the threshold to $684 per week. Employers raised concerns that the higher thresholds would force many salaried employees into hourly positions, impacting administrative processes and operational flexibility. Additionally, the court ruled that the Department of Labor (DOL) lacked the authority to implement such significant changes without Congressional approval.

With new presidential administration, it remains uncertain whether further adjustments to the overtime pay threshold will occur. Employers must stay alert, as the ongoing legal uncertainty surrounding this issue could continue to impact workplace compensation practices.

3. Upgraded Parental Leave Policies

Parental leave policies are expected to receive increased attention in 2025 as more states consider legislation mandating paid leave for new parents. Thirteen states already have robust paid family leave programs in place, and several others are exploring similar measures. Employers are recognizing the importance of providing comprehensive parental leave benefits not only to comply with evolving laws but also to attract and retain top talent.

The Family and Medical Leave Act (FMLA) remains a cornerstone of parental leave policies, ensuring eligible employees can take up to 12 weeks of unpaid leave for family or medical reasons without fear of losing their jobs. While FMLA provides critical job protection, the lack of paid leave under this federal law highlights the importance of state-mandated paid leave programs. Employers can bridge this gap by offering supplemental paid leave options, fostering a supportive work environment for employees navigating parenthood.

Paid parental leave benefits are shown to improve employee satisfaction, reduce turnover, and foster a healthier work-life balance. Companies that proactively update their policies to include generous paid leave options can gain a competitive edge in the job market while promoting a culture of inclusivity and support for working families.

4. Enhanced Pay Transparency

Pay transparency laws are expanding. By 2025, Illinois, Massachusetts, Minnesota, New Jersey, and Vermont will join the ranks of states requiring employers to disclose salary ranges. Meanwhile, 10 additional states are considering similar legislation, increasing the complexity for companies operating in multiple states.

Pay transparency plays a crucial role in fostering fairness and trust in the workplace. By openly sharing salary ranges and compensation structures, organizations can help reduce pay disparities, particularly those based on gender, race, or other biases. This transparency empowers employees to make informed decisions about their career paths and negotiate salaries with confidence. Additionally, research from Glassdoor indicates that 67% of job seekers consider salary information a key factor when evaluating job opportunities, suggesting that transparency can also enhance an organization's ability to attract top talent.

Pay transparency in 2025 is expected to become not only more widespread but also more precise. While many transparency laws require companies to "publish a good faith salary range," some organizations have stretched the limits of this requirement. For example, job postings with ranges like $50,000 - $150,000 clearly go against the spirit of the law. However, as more states implement stricter pay transparency regulations, salary range disclosures are anticipated to become more reflective of real compensation practices.

Check out our video below to discover how pay transparency impacts your organization. 

5. Updates to Independent Contractor Rules

A January 2024 rule from the Department of Labor (DOL) introduced a six-factor test for classifying independent contractors, replacing a simpler two-factor approach from the Trump administration.

While many businesses favor the earlier system for its clarity, experts anticipate the new administration may revisit and potentially reverse the current rule. Such a shift could simplify compliance for employers and contractors alike.

For the meantime, check out the Department of Labor’s extensive overview of the six factor test here. 

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