What to Know Before New Laws Take Effect January 1st

Close your eyes, take a deep breath, and look into the future with me for a moment. It's Monday, February 15, 2027. Business is good. Clients are booked, your team is humming, and you're feeling the kind of calm that only comes after a strong January.

Then one of your employees mentions in passing that their paycheck looked a little off. Or that employee that signed an agreement with non-compete language on January 4th decides they no longer want to work for the company, so you pull out their signed agreement, only to have someone tell you that the language is not enforceable.

No fire alarms went off. Nobody got served with a demand letter or a lawsuit. But now you're dealing with an issue reactively because you weren’t proactive before the ball dropped on 2026.

I get it—reading legislative updates to determine how new laws taking effect on January 1st might impact your business is not on your list of “10 Things I Need to Get Done Before 2026 Ends”. If I wasn’t a lawyer, it wouldn’t be on my list either! Honestly, even though it is on mine, I would much rather get a root canal without lidocaine than read dozens and dozens of pages of dry legislation, but I do it, so you don’t have to!

So I went through the new laws across Illinois, Michigan, Ohio, and the federal government to determine what is most important to small business owners. Here’s what you should know:

Federal Changes:

Remember how we were all tracking whether or we were going to have to comply with the Corporate Transparency Act which asked LLCs and corporations to report their owners to the federal government? Well good news! Beneficial ownership reporting is over for U.S. companies…for now. In August 2026, FinCEN made a final rule that removed that requirement for U.S. companies, effective August 14th. However, on October 27, 2026, a coalition of 20 states and the District of Columbia, in an attempt to force the federal government to flip the reporting switch back on, filed a major federal lawsuit against the U.S. Treasury and FinCEN. Want to know more? Read the release from the Office of the Illinois Attorney General.

And here’s a bit of more good news on the federal level. You may now have fewer 1099s to send. In previous years, if you paid an independent contractor $600 or more, you had to send a 1099-NEC or 1099-MISC. That threshold has now changed. Now, you only have to send a 1099-NEC or 1099-MISC if you paid an independent contractor $2,000 or more. While you may no longer have to send almost all of your independent contractors a 1099, it is still a best practice to keep a W-9 on file for every contractor, and to check with your CPA annually, because some states set lower limits.

Illinois Changes

Between Illinois, Michigan, and Ohio, Illinois is where most of the new laws live.

Non-compete and Non-solicitation Language

For agreements signed on or after January 1, the new earnings threshold for a non-compete to be legally enforceable will be more than $80,000 and the new earnings threshold for a non-solicit provision to be legally enforceable will be more than $47,500. Earnings generally mean what is shown in Box 1 of an employee’s W-2, plus certain retirement contributions. Including bonuses or commissions in the expected earnings calculation for the purpose of determining if an employee meets the threshold is hard because those amounts are uncertain, so be careful with those types of amounts. If an employee’s earnings fall short of the thresholds, the non-compete or non-solicit language can't be enforced.

Mandatory Menopause Accommodations

The Illinois Menopause Equity and Care Act will now explicitly require Illinois employers to provide reasonable accommodations for menopause and peri-menopause conditions, and symptoms like sleep disruption, mood or cognitive changes, and bone-density changes. The Illinois Menopause Equity and Care Act treats menopause-related conditions the way the Illinois Human Rights Act (IHRA) already treats pregnancy-related ones.

So what is a reasonable accommodation? Flexible hours or a temperature-adjusted workspace can be a reasonable accommodation. In addition, employer required accommodation postings need to specifically reference the accommodations an employee can receive under the act. Employee handbooks should be updated to outline reflect this new accommodation pipeline.

Disparate Impact

Illinois is codifying "disparate impact" liability under the IHRA. That means that Illinois employers can now be held liable for policies (e.g., blanket policies regarding criminal backgrounds, citizenship status, or family responsibilities) that impact protected groups harder than other groups, unless there is a strict, defensible business necessity. For example, a blanket ban on hiring anyone with a criminal record is the classic example of a policy that has a disparate impact. Employers should review their hiring (e.g., screens, tests, and background checks) and promotion criteria and document why each one is needed.

Job Posting Bans on Driver’s Licenses

If you have 15 or more employees, starting January 1st, employers can no longer legally require in “any specific job posting a statement that an applicant must have a valid driver’s license, unless driving is one of the essential functions of the posted job and is a business necessity.” When it is a specific function of the position, the job posting has to say why. Take the time to pull out your template job postings and make sure they are compliant.

Aggressive Enforcement Powers

In 2027, the Illinois Attorney General will be able to investigate more easily. House Bill 4725 gave the Workplace Rights Bureau sweeping new subpoena powers and confidential interviews powers to investigate wage and safety complaints. Clean recordkeeping is no longer optional—it is a shield against state-level investigators. For you as an employer, that means that pay records, time records, and contractor agreements should be somewhere you can find them quickly. And if someone shows up with a subpoena, pick up the phone and call your lawyer expeditiously!

Paid Jury Duty Leave

Illinois businesses with more than 25 employees must start paying employees their regular rate of pay for time spent serving on a jury. At 25 or fewer, it remains unpaid time off, though an employer still can't fire or pressure someone over jury service.

Minimum Wage Increases in Michigan and Ohio

If you are an employer in Michigan or Ohio, make sure your payroll system is updated before you run your first January payroll. As of January 1, 2027, Michigan increased its minimum wage for non-tipped employees from $13.73/hour to $15.00/hour (with adjustments for inflation each year thereafter) for employers with two or more employees. If anyone works for you in Ohio and your business brings in more than $419,000 a year, minimum wage for non-tipped employees increases from $11.00 to $11.40.

What You Should Do Now

You have several weeks before January 1st, which gives you plenty of time to make sure that your business is ready for any new law changes that will affect it. Review your workplace policies and practices to determine which ones might be affected by the 2027 changes in law.

I'm here. And I'm always on your side.

Mel

This post is provided for general informational purposes only and does not constitute legal advice. Reading this post does not create an attorney-client relationship with MDG Law Virtual, LLC or Mel Green. Mel Green is licensed in Illinois, Michigan, and Ohio. © 2026 MDG Law Virtual, LLC.