If 2020–2024 taught HR leaders how to operate through volatility, 2025–2026 is teaching them how to govern it. The new challenge isn’t just more rules; it’s the speed and fragmentation of rules colliding with hybrid operations, AI-mediated decisions, and employees who expect quick, transparent answers. As a result, the gap between what your policy says and what managers actually do has become the single biggest driver of HR risk.
This article is about closing that gap by treating HR not as a binder of policies, but as a system of defensible decisions. Defensibility means you can show, with records and reasoning, that actions were timely, consistent, and tied to legitimate business needs. It’s what outside reviewers including plaintiffs’ counsel, agencies, arbitrators that look for when headlines turn into inquiries.
The compliance landscape you’re really navigating
Overtime & exemptions are a moving target. The Department of Labor’s 2024 rule significantly raised salary thresholds for the white-collar exemptions and built in future updates. Many SMBs adjusted once; fewer have built the cadence to revisit thresholds, duties, and downstream pay compression as markets shift. Treat this as a standing control: role-by-role files showing duties, salary basis, and threshold checks, revalidated on a set schedule and after any material job redesign.
Joint employment isn’t “over”, it’s just different. The NLRB’s expansive 2023 joint-employer rule was vacated in March 2024, and the Board later withdrew its appeal. That ended one version of the risk but not the underlying exposure that comes from blurred supervision lines in franchise, staffing, and vendor models. Documenting who directs day-to-day work, who sets schedules, and whose policies actually apply remains essential.
Heat safety is moving from best practice to expectation. OSHA’s heat illness prevention standard is still in rulemaking, but the public hearing concluded in July 2025 and a record now exists for enforcement attention. Even before a final rule, expect scrutiny through the General Duty Clause and state/municipal action. If you have indoor high-heat environments (kitchens, warehouses) or outdoor crews, regulators will want to see plans, training, and acclimatization protocols, not just a note to “drink water.”
AI governance is now table stakes. Whether you’re screening applicants, assigning shifts, or surfacing performance insights, using automated tools does not insulate you from anti-discrimination obligations. Federal policy winds have shifted over the past year, but the core rule remains simple: existing discrimination laws still apply to algorithmic decisions. Employers are expected to understand how tools impact protected groups, to document job-relatedness, and to offer reasonable alternatives when needed.
Pay transparency has become a structural program, not a posting tweak. With more states and localities requiring range disclosure and/or employee access to pay information, the pressure has shifted from “Do we include a range?” to “Is our range defensible, and are our processes consistent with what we publish?” Compensation philosophy, calibration rhythms, and documentation of promotion and pay decisions are now discoverable artifacts in many jurisdictions. Keep an eye on which states you hire in when coverage has been expanding and local ordinances add complexity.
The hidden risk multipliers inside growing companies
Multi-state sprawl without policy addenda. Remote and hybrid norms created quiet compliance drift. A handbook written for your headquarters state will not carry you through meal/rest rules, final pay timing, paid leave accrual, and expense reimbursement differences elsewhere. The fix isn’t a new 80-page handbook; it’s a short master policy plus jurisdiction-specific addenda tied to where people actually work (not just where the company is registered). Keep a living map of employee locations and require HR sign-off before new locations open, even for a single remote hire.
Manager-led HR without guardrails. When a high-growth firm promotes strong operators into frontline leadership, those managers inherit the thorniest people decisions including performance plans, schedule disputes, disability and religious accommodations. Without decision frameworks, even well-intentioned choices can look inconsistent. Replace “call HR if you’re unsure” with explicit triggers: HR must review before any final warning, demotion, or separation. Then prove it with a timestamped review note inside the case file.
Documentation that starts too late. Many employee-relations issues live in inboxes until they escalate. By the time HR is looped in, facts are fuzzy, and inconsistent treatment has crept in across teams. Implement a single pathway for concerns when anonymous is optional, always time-stamped and require short written summaries after every verbal counseling. Your future self (and outside reviewers) will thank you.
AI pilots that outpace governance. Shadow projects proliferate because automation feels “experimental.” But the legal exposure is real once a tool touches selection, compensation, scheduling, or discipline. Inventory the tools, require a lightweight adverse-impact check before go-live, and record job-relatedness (what business need the tool is solving and how the selected variables map to that need). Maintain an accommodation pathway for those who cannot or should not be assessed by automation.
What “defensible HR” looks like in practice
1) A clear standard for decisions is visible to managers and auditable by outsiders.
For high-frequency scenarios (attendance, conduct, performance), publish two assets: a one-page decision flow for managers and a back-end SOP for HR that lists required data, reviewers, and records. The flow keeps pace with the field; the SOP proves consistency.
2) Role-by-role exemption files are not spreadsheets.
For each exempt role: attach the job description aligned to the duties test, the current salary basis, the date of last threshold validation, and any changes in scope that triggered re-review. Add a short note explaining why the job meets the exemption. Re-validate at a set cadence and whenever the role changes materially. This transforms a scramble into a routine control when salary thresholds adjust.
3) Transparent pay architecture.
Stop treating pay ranges as a posting requirement and start treating them as a governance object. Publish your compensation philosophy internally (what market you price to, how you handle geography/hybrid, and what “meeting expectations” means). Keep a calibration log: when ranges were last reviewed, the data sources used, and the rationale for adjustments. Tie promotions to documented criteria, not just manager nomination. When transparency laws bite, you’ll be ready and when they don’t, your story will still hold up.
4) A living jurisdiction library.
Maintain a simple wiki: onboarding notices, wage statements, meal/rest rules, paid leave, final pay timing, and expense reimbursement are tagged by state/city. Every new hire location triggers a checklist. Treat this like change management: who monitors updates, how they’re validated, and how managers are notified.
5) A safety program that anticipates heat.
Whether or not a federal standard finalizes this year, regulators already expect written heat illness prevention plans, training logs, acclimatization protocols, and incident reviews, especially in warehouses, kitchens, and outdoor work. If you’re in a temperate climate, document how you monitor indoor heat (not just ambient weather) and how you adjust work/rest cycles.
6) An AI/automation inventory with bias checkpoints.
List each tool across the employee lifecycle, its purpose, the data it uses, and the risk owner. Before production use, run a simple disparate-impact screen (or obtain it from the vendor), record job-relatedness, and describe the accommodation or alternative. Regulators don’t need you to be a data scientist but they do expect you to control your process and your vendor.
How to operationalize all of this without slowing the business
Design for cadence, not heroics. The companies that survive audits and litigation don’t do one-time cleanups; they run quiet, frequent routines. Example: a monthly 45-minute “defensibility review” that samples one employee-relations case, one compensation action, and one exemption file. Over a year, that’s 36 discrete quality checks does enough to catch drift early.
Treat HR data like financial controls. Timestamp intake. Record who reviewed and when. Keep final memos that explain why an action was taken, not just what it was. Use short, standard notes; consistency beats verbosity.
Make managers successful by making the right thing the easy thing. Offer approved scripts for tricky moments (e.g., performance feedback, attendance resets, accommodation intake) and auto-file them to the case record when used. Replace informal “Ask HR” habits with a visible “If X, then Y” map embedded in the tools managers already use.
Close the loop with employees. In an era of transparency and social amplification, acknowledgement and timely follow-through matter as much as the ultimate outcome. Publish SLAs for response times on complaints and requests. When closing an investigation even with “no finding” for instance can communicate that the concern was taken seriously, the process used, and the next steps.
A brief word on wage floors and expectations
Even where your exempt roles are properly classified, wage floors shape expectations, compression, and employee churn. 2026 brings another wave of state and local minimum-wage changes, and while that’s not the same as exemption thresholds, it affects internal equity and manager messaging. Map your footprint, model compression effects, and be ready to explain both the math and the philosophy to employees.
The takeaway
In 2026, informal HR can’t carry formal risk. What protects growing companies isn’t longer handbooks; it’s short, consistent routines that prove your decisions are principled and repeatable. If you can show your work across pay, time, safety, AI, and third-party relationships that you earn defensibility long before a question becomes a claim.
Take 30 Seconds to Uncover Hidden HR Risk
In 2026, HR complexity is outpacing informal systems, and the risk is rising. This assessment helps leaders pinpoint where HR risk exists, so it can be managed, mitigated, or intentionally accepted. Insights focus on the HR areas most likely to create employee challenges, operational disruption, or unexpected cost.
Take Your HR Risk Assessment Now →Frequently Asked Questions
What are the biggest HR challenges in 2026?
The biggest HR challenges in 2026 include employee relations risk, documentation gaps, manager inconsistency, hybrid workforce compliance, and the need for defensible decision-making frameworks.
When should a business consider HR Advisory support?
HR Advisory is most valuable when HR decisions feel urgent, high-risk, or difficult to delay, especially around discipline, complaints, investigations, or inconsistent practices.
Is HR Advisory a replacement for internal HR?
No. HR Advisory supports internal HR teams by providing structure, frameworks, and guidance when capacity is stretched or risk is elevated.
How does HR risk usually start?
HR risk often starts with informal decisions, undocumented conversations, and inconsistent manager actions, not intentional wrongdoing.
What is an HR Risk Assessment?
An HR Risk Assessment identifies documentation gaps, inconsistent practices, and decision-making exposure before issues escalate into formal complaints or legal action.
If any of this feels familiar, HR Advisory can help you put structure in place before risk escalates.
If you need help with workforce management, please contact PeopleWorX at 240-699-0060 | 1-888-929-2729 or email us at HR@peopleworx.io
