Under federal law, employers are responsible for preventing and addressing workplace harassment. And the EEOC is enforcing that harder than ever.

In FY2025, the agency recovered a record $528 million through pre-litigation settlements alone. Individual employer settlements have ranged from tens of thousands to millions of dollars.

If an employee files a harassment claim, your best defense is being able to show that you took reasonable steps to prevent it and acted quickly when issues came up. That means having a real program in place, with documentation to back it up.

What does a strong program look like?

1️⃣ Your anti-harassment policy is current and specifically addresses harassment by non-employees

2️⃣ You can prove that your team has read and acknowledged it

3️⃣ Your managers have had proper training on recognizing and responding to harassment

4️⃣ There’s a documented reporting process that your employees know how to use

5️⃣ Your policy and training cover all work situations, including off-site events, travel, client-facing roles and remote work

6️⃣ You could pull all of that evidence together quickly if you had to respond to an EEOC charge

Most of the businesses we work with have some of this in place but gaps in others.

If you have gaps, they need fixing. Contact us to learn more about our harassment prevention reviews.

—-

The EEOC’s record enforcement year: what it means for small businesses

The EEOC recovered $528 million through pre-litigation settlements in FY2025. That’s the highest figure in the agency’s 60-year history and it happened before a single lawsuit was filed.

The agency has also ramped up its use of AI-driven intake tools to process complaints faster and accelerate investigation timelines.

For small business owners, the takeaway is clear. If an employee files a charge, the EEOC is moving faster than it used to and weak documentation makes it significantly harder to defend your position. Strong recordkeeping, consistent policies and timely responses to internal complaints are your best protection against being pressured into a settlement you didn’t see coming.

The DOL wants to change how you classify independent contractors (again)

In February 2026, the Department of Labor proposed a new rule on how to determine whether a worker is an employee or an independent contractor under the FLSA.

The proposed rule would rescind the Biden-era 2024 standard and replace it with a streamlined “economic reality” test that prioritizes two core factors: the degree of control the employer has over the work and the worker’s opportunity for profit or loss based on their own initiative.

If you rely on independent contractors, this is worth keeping a close eye on.

While the proposed rule may make federal classification somewhat more flexible for employers, state laws in places like California, Massachusetts and New Jersey remain much stricter. And the penalties for getting classification wrong can include back pay, retroactive payroll taxes and fines that add up fast.

Small business owners are still struggling to find qualified workers

According to NFIB’s July 2026 Jobs Report, 36% of small business owners reported job openings they could not fill, up 4 points from June and the highest reading since June 2025. Of those actively hiring, 85% said they received few or no qualified applicants.

Hiring plans surged to their highest level since October 2022, but the workers to fill those roles aren’t there. Finding and keeping qualified employees continues to rank as one of the biggest challenges small business owners face.

The hiring picture has been difficult for years now, and it’s putting real pressure on day-to-day operations.

Having clear job descriptions, a consistent hiring process, and competitive compensation practices in place matters more than it used to. The cost of a bad hire, or no hire at all, only goes up when the labor market is this tight.

—-

Is your employees’ AI use leaving you exposed?

If you don’t have the right policies and training in place around how AI is being used, you could be leaving your business exposed.

The most immediate concern is data security.

When an employee pastes client information, financial data or internal correspondence into a third-party AI tool, that information often leaves your control. Depending on the tool and its settings, it may be used to train the model or stored externally.

You could be violating confidentiality obligations or exposing trade secrets before you’ve even realized what happened.

Then there’s quality.

AI generates convincing output, but it also generates convincing errors. If your employee sends a client a document or calculation that was produced by an AI tool and never properly checked, any mistake has your business’s name on it.

There are also questions around IP ownership that most offer letters and employment agreements don’t address.

If an employee produces work using an AI tool, who owns it? Your agreements probably don’t say. And if someone submits AI-generated work as their own without disclosing that, how do you handle it? Is that a conduct issue? Your policies need an answer.

A basic AI use policy doesn’t need to be complicated. It should cover which tools are and aren’t permitted, what types of data must never be entered into an AI tool, how AI-generated work should be reviewed before use and how to handle it in client-facing work.

We can help you to put a policy together that’s practical and reasonable, without banning tools that your team actually finds useful. If you don’t have one yet, now is a good time to contact us.

—-

Q&A

What should I do if an employee reports harassment?

Take it seriously and act fast. Document the complaint, separate the people involved, where possible, and investigate promptly. Don’t wait to see if it “blows over.”

Under federal law, your liability depends partly on how quickly and effectively you responded.

If you don’t have someone internally who can handle an investigation properly, bring in outside help. A slow or poorly handled response can be just as damaging as no response at all.

Can I change an employee’s schedule without their agreement?

Under at-will employment, generally yes. But if the change comes right after a complaint, accommodation request or protected leave, it could look like retaliation.

You also need to consider whether it affects overtime status or FLSA classification. Some cities and states have predictive scheduling laws that may apply.

Even where you’re legally clear, giving employees a heads-up and explaining the business reason avoids unnecessary turnover.

Do I have to give a reference for a former employee?

No federal law requires it. If you do give one, it needs to be accurate. A reference containing false or misleading statements can expose you to a defamation claim.

Most employers are safest sticking to the basics: job title, dates of employment and rehire eligibility.

If you’re unsure what you can say, get advice before responding.