HRPA Discusses Challenges of Navigating State Law Proliferation with Harvard Business Review

In a Harvard Business Review article published February 5, HRPA’s Tim Bartl and Ani Huang, discuss how a lighter touch on regulation at the federal level leads to increased action among the states. The article highlights HRPA’s new State Law Guide by Greg Hoff.

High on the list of examples is the Trump Administration pull-back on DEI. States with laws requiring certain diversity measures, like the California and Illinois requirements to collect and report race, gender and pay data, put employers between a rock and a hard place with compliance.

Why it matters: When Congress and federal agencies avoid regulating key workplace issues, the states often fill the gap resulting in fragmentation, contradiction, and complicated compliance.

Four Issues Active on the State Level

1. Use of non-competes: Non-compete restrictions exist in just over half the states and vary widely in terms of affected industries and pay thresholds. With almost no overlap in state approaches, this patchwork requires multiple compliance plans.

2. Paid leave: Many companies end up hiring third-party administrators to comply with state laws that set different standards for elements of paid leave: the reason an employee is allowed to take leave, the number of paid weeks employers must provide, and whether costs are funded by employer or employee payroll taxes, or both.

3. Pay transparency: Typical state approaches include banning the use of salary history and/or requiring the use of pay ranges in job postings. However, specific requirements can vary widely across states.

4. AI regulation: In the 2024 legislative session, at least 45 states, Puerto Rico, the Virgin Islands and Washington, D.C., introduced AI bills that range from prohibitions on algorithmic discrimination to requirements to inform applicants of the use of AI in the hiring process.

How can employers mitigate risk: To avoid redundancies, inefficiencies, and costly non-compliance penalties, employers should consider the following:

• Create a centralized compliance framework. To build such a framework, companies should establish a cross-functional compliance team from legal, human resources, and operations; invest in technology to track state-level changes; and regularly update leadership on emerging trends to align strategy with regulatory developments.

• Standardize policies while keeping flexibility. A successful strategy involves developing a core set of policies aligned with the strictest requirements across states while creating addendums tailored to local laws.

• Actively communicate with employees about state differences and their impact. Good communication prevents confusion, builds trust, and ensures employees understand how policies apply to them and affect the company’s performance. Best practices include manager training to explain policy variations, easy-to-access tools like intranet updates,  and regular Q&A sessions to address concerns or recent changes.