As we enter 2026, Illinois employers face a new frontier of regulation: Artificial Intelligence (AI). While 2025 brought us a sweeping overhaul of Pay Transparency and Child Labor laws, 2026 focuses on the digital workplace.

The headline for Jan. 1, 2026, is the strict enforcement of regulations regarding AI in hiring and employment decisions. This article will examine the new AI regulations taking effect this year and provide a compliance checklist for the major laws that settled in 2025.

Please note that labor laws are constantly changing. For ongoing updates, please refer to the Illinois Department of Employment Security.

Pay Transparency

Effective since 2025, the amendment to the Illinois Equal Pay Act requires all employers with 15 or more employees to include pay scale and benefits information in all job postings.

Now that the grace period of the initial rollout has passed, enforcement is expected to tighten in 2026. The law applies to positions physically performed in Illinois or remote work where the employee reports to an Illinois-based supervisor.

Compliance Check: Ensure your listings include the wage/salary range and a general description of benefits (bonuses, stock options, health, and retirement). This must be disclosed directly in the posting or via a clickable link.

Third-Party Liability: If you use third-party job boards, verify they are displaying your data correctly. You remain liable if the information is missing unless you can prove you provided it. Additionally, remember to inform current employees of promotion opportunities within 14 days of external posting—a critical step often missed in the hiring rush.

Payroll Obligations

As of 2025, amendments to the Illinois Wage Payment and Collection Act (WPCL) via SB 3208 significantly altered payroll reporting requirements. If you have not yet updated your payroll software, you are at risk of non-compliance in 2026.

Employers must issue a distinct pay stub (replacing simple itemized statements) each pay period. This stub must clearly detail:

• Hours worked;
• Gross wages earned;
• Specific deductions; and
• Year-to-date totals for wages and deductions.

Record Retention: You must retain copies of these stubs for at least three years. If a former employee requests a copy, you have 21 days to provide it. Civil penalties for failure to comply can reach $500 per violation, so ensure your digital record-keeping is robust.

AI & Discriminatory Employment Policies

The most significant new change for Jan. 1, 2026, involves the Illinois Human Rights Act (IHRA) regarding technology in the workplace.

1. NEW for 2026: Regulation of Artificial Intelligence (AI): Illinois now regulates the use of AI in employment decisions. Effective Jan. 1, 2026, employers must notify employees and applicants when AI is used for recruitment, hiring, promotions, and other employment activities. Furthermore, the IHRA amendment prohibits the use of AI tools if they have a discriminatory effect. Employers are banned from using proxies (such as zip codes) that could indirectly discriminate against protected classes.
2. Ongoing Protections (Family & Reproductive Health): Protections established in 2025 are now fully enforceable. The IHRA includes "reproductive health decisions" and "family responsibilities" as protected classes.
   • Reproductive Health: Employers cannot discriminate based on abortion, fertility treatments, or contraception use.
   • Family Responsibilities: Employees providing personal care to family members are shielded from discrimination. While you are not required to accommodate every time-off request, you cannot take adverse action solely based on their caregiving status.
3. Extended Filing Period: Remember that the statute of limitations for filing discrimination claims with the IDHR has been permanently extended to two years (up from 300 days).

Child Labor Laws: Strict Enforcement

The "Child Labor Law of 2024" (SB 3646) has been in effect for a full year. In 2026, auditors will be looking for strict adherence to the work-hour limits established by this framework.

Designed to prioritize the educational needs of minors under 16, the law mandates:

• School In Session: No more than 18 hours per week (and no more than 3 hours on school days).
• School Not In Session: No more than 40 hours per week.
• The "30-Minute" Rule: Minors must receive a 30-minute meal break if they work more than five consecutive hours. Missing this break documentation is a common audit failure.
• Adult Supervision: Minors must be supervised by an adult (21+) at all times.

Penalties are severe, ranging up to $60,000 for violations resulting in injury or death. Ensure you have the proper employment certificates on file at the worksite for all minor employees.

What Steps Should You Take Today?

The introduction of AI regulations in 2026, combined with the maturation of 2025's transparency and payroll laws, creates a complex compliance landscape.

Is your business adequately prepared? Staying ahead of these changes requires precise documentation. Implementing employee time tracking and payroll tools, like those offered by OnTheClock, can streamline compliance with these obligations—specifically regarding the tracking of minor work hours (to avoid child labor violations) and automating the data needed for legally compliant pay stubs.

By taking proactive steps now, your company can meet the new AI requirements and ensure your 2025 policies are holding up to scrutiny. As labor laws continue to evolve, tools like OnTheClock can help you stay compliant and operate more efficiently.

For more information on how OnTheClock can support your compliance efforts, visit www.ontheclock.com.