Welcome to Issue #16 of The Compliance Brief. Every Tuesday I break down the HR and labor law updates that actually matter to small businesses — in plain English, no legal jargon.

Two States Just Raised the Bar on AI Hiring Tools

If you use resume screeners, chatbots, or scoring tools to evaluate candidates, two new state laws just changed what's required of you.

Illinois's HB 3773 took effect August 1, requiring employers to notify applicants and employees whenever AI is used in an employment decision — before the tool is used, not buried in a handbook. Washington's HB 1905 took effect July 27 and goes further, adding an annual bias audit requirement on top of notice. It's the first state law to pair disclosure with an ongoing audit obligation — a signal of where hiring-tech regulation is headed nationally.

Action step: Inventory any AI-assisted hiring tools you use and confirm your applicant-facing notices are updated.

1. New York Overhauls Non-Compete Rules

Starting September 2, non-competes are void for New York employees earning under $150,000/year. Remaining lawful agreements will require 14 days' advance notice before signing. If you have NY-based staff, review which agreements survive.

2. EEOC Moves to Rescind Decades-Old Hiring Guidelines

The EEOC plans to eliminate the 1978 Uniform Guidelines on Employee Selection Procedures — including the "four-fifths rule" used to flag discriminatory hiring tests. Final action is projected for November 2026. If you use structured assessments or scored interviews, validation requirements may shift.

3. New Jersey Enacts First-of-Its-Kind Employer Medicaid Assessment

New Jersey passed a law creating a new cost exposure for employers whose employees rely on Medicaid. Details are still emerging — worth watching if you have NJ employees.

✅ Inventory AI hiring tools and confirm IL notice / WA audit compliance

✅ Flag NY employment agreements that may become void under the $150K threshold

✅ Watch for EEOC guidance changes if you use scored hiring assessments

✅ If you have NJ employees, monitor Medicaid assessment developments

The EEOC's Uniform Guidelines on Employee Selection Procedures page explains the "four-fifths rule" and current selection-tool validation requirements: eeoc.gov

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That's it for this week. Short, actionable, no fluff.

If this was useful, forward it to another small business owner who could use it.

See you next Tuesday.

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This is for informational purposes only and does not constitute legal advice.