As we step into 2025, businesses across the country face several important updates in labor laws and employee benefits. Staying ahead of these changes is crucial for employers to remain compliant and support their workforce effectively. From IRS updates to new state-specific laws, here’s a breakdown of the most significant 2025 employment law updates that could impact your business operations this year.
Federal Updates
IRS Retirement Plan Maximums
For 2025, the IRS has raised the maximum contribution limit for 401(k) and similar retirement plans to $23,500, an increase from $23,000 in 2024. Participants aged 50 and older can still contribute an additional $7,500 as a catch-up allowance. Those aged 60 to 63 are eligible for further catch-up contributions.
IRS Mileage Reimbursement Rate
Employees using their personal vehicles for business purposes can now claim a mileage reimbursement of $0.70 per mile, up from $0.67 in 2024. This adjustment is one of the 2025 employment law updates impacting employer reimbursement policies.
Medical FSA and Qualified HSA Changes
Medical FSA: The contribution limit has increased to $3,300 (from $3,200 in 2024).
Qualified HSA: Limits for 2025 are as follows:
- Individual coverage: $4,300 (up from $4,150 in 2024).
- Family coverage: $8,550 (up from $8,300 in 2024).
To take advantage of an HSA, participants must pair it with a qualified high-deductible health plan.
State Updates
California Updates
Expansion of Paid Sick Leave
California has broadened the scope of paid sick leave to include the following:
- Jury duty.
- Justifiable personal reasons, such as court appearances, funerals, or religious ceremonies.
- Any reason covered under the victim leave law.
Victim Protection Law
The law now defines a victim as anyone experiencing qualifying actions of violence, including but not limited to domestic violence, sexual assault, and stalking. Employees may take leave for relocation, legal preparation, and court appearances.
Disability Insurance Updates
- Employees can now submit state disability insurance claims up to 30 days before their leave begins.
- Eligible employees earning less than $63,000 annually may receive up to 90% of their missed wages.
Paid Family Leave Requirement Changes
Employers may no longer require employees to use vacation or PTO during family leave. Additionally, employees earning under $63,000 annually may receive up to 90% of their missed wages.
Application Requirement Changes
Employers with five or more employees can no longer require job applicants to have a driver’s license unless driving is an essential function of the position.
Colorado Updates
Overtime
Employers must include holiday shift differentials in the overtime pay calculation for nonexempt employees.
Pay Transparency Law
Colorado now mandates that employers notify employees of all job opportunities (not just promotional ones) and provide post-selection notifications to employees. This change is part of the broader 2025 employment law updates aimed at improving workplace transparency.
Family and Medical Leave
Under the Colorado Paid Family and Medical Leave Insurance (FAMLI) program, eligible employees can take up to:
- 12 weeks of job-protected leave.
- An additional 4 weeks of leave for pregnancy-related conditions.
Partial wage replacement will be funded through payroll tax contributions.
Connecticut Updates
Paid Sick Leave
Starting January 1, 2025, employers with 25 or more employees must provide paid sick leave. This requirement will expand to smaller employers in subsequent years:
- 2026: Employers with 11–24 employees.
- 2027: Employers with 1–10 employees.
Illinois Updates
Job Postings
Employers with 15 or more employees must now include pay scales in job postings and inform current employees about promotional opportunities within 14 days of posting the job.
Pay Stub Requirements
Pay stubs must now include detailed information, such as:
- Hours worked.
- Rates of pay (including overtime).
- Gross wages.
- Year-to-date wages and deductions.
Kentucky Updates
Medical Cannabis
Effective January 1, 2025, Kentucky has legalized medical cannabis for certain conditions. Employers may only discipline or terminate employees for cannabis-related impairment if they:
- Conduct a drug test.
- Perform a behavioral assessment to establish current impairment.
Maine Updates
Family and Medical Leave
Employers with 15 or more employees at a single location must provide up to 10 weeks of job-protected leave for reasons such as:
- Serious health conditions (employee or family member).
- Childbirth, adoption, or organ donation.
- Injury or death of a family member.
This part of the 2025 employment law updates ensures greater job security for Maine employees.
Maine will also roll out a state-managed paid leave program:
- January 1, 2025: Payroll deductions begin.
- May 1, 2026: Employees can begin using these benefits.
Minnesota Updates
Job Postings
Employers with 30 or more employees must now include a pay range and benefits description in job postings.
New York Updates
Pregnancy Leave
Employers must provide pregnant employees with 20 hours of paid prenatal leave per 52-week period.
The leave can be used for pregnancy-related appointments or testing. Employers are prohibited from requesting medical records as a condition for granting this leave.
Washington Updates
Paid Sick Leave
Washington has expanded its paid sick leave laws to cover a broader range of qualifying reasons for leave and to include an expanded definition of family member.
Staying Ahead of Compliance in 2025
With federal and state regulations changing across multiple areas, it’s critical for employers to review their policies, update employee handbooks, and adjust payroll and leave systems accordingly. Keeping up with 2023 employment law updates doesn’t just meet legal requirements. It also contributes to a better workplace culture.
Need help navigating these updates? Escalon specializes in outsourced HR, payroll, and compliance services, helping businesses streamline operations and stay ahead of evolving regulations. Contact us today to learn more about how we can support your business in 2025 and beyond.
