Recent developments involving the U.S. Department of Defense (DOD) and Anthropic, the developer of the Claude AI platform, highlight an important consideration for government contractors and subcontractors: AI tools may be subject to contract-specific restrictions or customer requirements.

A federal judge overturned the DOD's designation of Anthropic as a national-security supply-chain risk. However, DOD has continued to raise concerns about Anthropic's use in the Defense Industrial Base. Claude has been used in defense-related environments for activities such as intelligence analysis, document processing, operational planning, logistics, and other mission-support functions, including through systems used by defense contractors.

The DOD's experience also illustrates why government contractors should pay attention to AI-use requirements. DOD has been transitioning classified AI workloads away from Anthropic models, including systems supporting defense-related operations.

For government contractors, AI use is increasingly connected to data security and contract compliance. Before using an AI tool for contract-related work, employees should confirm that the tool is authorized and understand what company, client, government, or other sensitive information may—and may not—be entered into the platform.

What Contractors Should Do

• Review applicable contracts and flow-down requirements for restrictions involving AI tools, software, technology, data, or third-party services.

  
  

• Follow your company's approved AI tools and acceptable-use policies.

  
  

• Do not use Claude or other AI models for government-related work unless their use has been authorized where required.

  
  

• Do not enter sensitive or confidential information into an AI tool unless the tool and the specific use have been approved.

  
  

• When in doubt, ask your contract, security, IT, or management team before using an AI tool for contract-related work.

The DOD-Anthropic dispute is a reminder that requirements affecting AI use can change quickly. Government contractors and subcontractors should rely on their specific contractual, security, and organizational requirements when determining whether and how AI tools may be used.

With State primary elections occurring throughout 2026 and the nationwide general election scheduled for November 3, employers should review applicable state and local requirements for employee time off to vote. 

• There is no federal requirement that private employers provide voting leave, but 28 states and the District of Columbia have laws requiring some form of voting leave and may address the amount of time available, whether the time is paid, when the leave may be taken, employee notice, and required employer postings.  

  
  

• Because polling hours vary by jurisdiction, employers should not assume that an employee can vote outside of working hours.  

  
  

• Employers should allow employees reasonable time to vote consistent with applicable state and local requirements.   

  
  

• Even when voting leave is not legally required, employers should handle employee requests consistently with applicable company policies and avoid retaliation or other adverse action related to an employee’s lawful voting or political activity.  

  
  

• Where permitted by law, employers may schedule voting time at the beginning or end of the employee's workday, or otherwise adjust the employee's schedule, to minimize disruption to business operations while ensuring the employee has sufficient time to vote before voting locations close.  

  
  

• Employees may also request to use available PTO or vacation time for voting, subject to applicable law and the employer's leave policy; however, employers should not substitute PTO for a separate voting-leave entitlement where state or local law provides one. 

Selected State Voting-Leave Requirements 

The following summarizes key requirements in jurisdictions highlighted in recent 2026 guidance. This is not an exhaustive 50-state survey. 

As Election Day approaches, employers should contact the C2 HR Team with questions about voting-leave requirements applicable to employees in specific work locations. Because voting-leave laws are jurisdiction-specific, employers should not assume that a policy or practice that applies in one state will satisfy requirements in another. 

Effective January 1, 2027, employers with employees working in Illinois or Philadelphia should be prepared for expanded workplace protections related to menopause and perimenopause. These developments are part of a growing number of state and local employment requirements addressing menopause-related workplace needs. 

Illinois: New Accommodation Requirements 

Illinois enacted legislation addressing menopause-related conditions and reasonable workplace accommodations. Beginning January 1, 2027, Illinois employees experiencing menopause-related conditions may be entitled to reasonable accommodations, subject to the requirements and limitations of Illinois law.

Potential accommodations may include flexible or modified work schedules, temperature or climate adjustments, private space for symptom management, remote work options, and certain light-duty assignments when safe and feasible. Employers must also engage in a timely, good-faith interactive process when an accommodation is requested. 

Philadelphia: Local Protections Also Expand 

Philadelphia has separately amended its Fair Practices Ordinance to expressly prohibit employment discrimination based on menstruation, perimenopause, and menopause. The ordinance also requires reasonable accommodations when symptoms substantially interfere with an employee's ability to perform one or more job functions, provided the employee requests an accommodation and the accommodation would not create an undue hardship. The changes take effect January 1, 2027. 

How These Requirements Interact With the Americans with Disabilities Act (ADA) 

Employers should also consider federal ADA requirements when responding to an employee experiencing menopause-related symptoms. The ADA generally applies to employers with 15 or more employees and requires reasonable accommodation for a qualified individual with a disability unless doing so would create an undue hardship. 

Menopause or its symptoms are not automatically an ADA disability. The ADA determination depends on whether the employee has an impairment that meets the ADA's definition of disability. Intermittent symptoms may still qualify depending on their impact when active. Importantly, an employee may have accommodation rights under state or local law even when the ADA does not apply. For example, an employer with fewer than 15 employees may not be covered by the federal ADA but could still be subject to applicable state or local requirements. 

Manager Guidance: Responding to Employee Concerns 

Because accommodation discussions may begin between an employee and their direct manager, managers should be prepared to recognize when an employee may need a workplace adjustment related to a medical condition. 

Managers should: 

• Avoid making medical or legal determinations. Do not attempt to diagnose a condition or decide whether an employee qualifies for protection. 

• Do not promise or deny an accommodation on the spot. Acknowledge the concern engage in an interactive process to identify an effective accommodation. 

  
  

Best Practice: Use One Accommodation Process 

For employers subject to multiple requirements, a practical approach is to use one consistent, interactive accommodation process rather than trying to determine at the outset which law applies. When an employee raises a menopause-related workplace concern: 

• Listen to the employee's stated workplace need rather than requiring the employee to use specific legal terminology such as "ADA accommodation." 

• Engage in an interactive process to identify an effective accommodation. 

• Consider reasonable options such as schedule modifications, additional flexibility, temperature adjustments, workspace changes, breaks, remote or hybrid work where appropriate, or leave, depending on the circumstances and applicable law. 

• Maintain appropriate confidentiality for medical information and accommodation documentation. 

• Train supervisors and managers to recognize when an employee may be requesting assistance and to promptly refer the matter to HR rather than attempting to make a medical or legal determination themselves. 

Using a coordinated process can help employers provide appropriate support to employees while reducing the risk of overlooking a state or local requirement that may provide protections beyond the federal ADA. 

The employer’s established leave of absence (LOA) process should be used when an employee needs time away from work for three days or more under an applicable leave program. However, not every accommodation involves leave. An employee may need a workplace adjustment—such as additional breaks, a modified schedule, or a temperature change—while continuing to work. 

Undue Hardship: What Employers Should Know 

Undue hardship generally means that a requested accommodation would create significant difficulty or expense for the employer. Employers should not assume that an accommodation creates an undue hardship simply because it is inconvenient, involves some expense, or changes how work is normally performed. Each request should be evaluated based on the specific circumstances. 

• Federal ADA: Factors may include the nature and cost of the accommodation, the employer's financial resources, the number of employees, and the nature and structure of the business. 

• Illinois: The 2027 menopause-related requirements include an undue-hardship limitation. Employers should evaluate the specific request and consider whether another effective accommodation may be available. 

• Philadelphia: The menopause-related ordinance also recognizes undue hardship as a limitation on the accommodation requirement. 

The Equal Employment Opportunity Commission (EEOC) defines an accommodation as an undue hardship when it materially disrupts operations, prevents timely customer service, or cannot reasonably be performed given the nature of the job.

On the other hand, an accommodation that involves some expense or requires a modest change to an employee's schedule does not necessarily constitute an undue hardship. Each request should be evaluated based on the specific circumstances.  See examples under EEOC – The ADA: A Primer for Small Business.  

Additional Resources 

Employers seeking additional information on reasonable accommodations and the ADA may review the U.S. Equal Employment Opportunity Commission's employer resources, including guidance addressing telework/remote work as a reasonable accommodation: 

• EEOC – Work at Home/Telework as a Reasonable Accommodation  

• EEOC – Disability Discrimination and Employment Decisions  

• EEOC – Disability-Related Resources for Employers 

As a PEO and HR compliance partner, C2 monitors employment requirements that may affect clients and their employees across multiple jurisdictions. When an employee requests an accommodation, C2 can assist with the initial HR review and help identify applicable federal, state, and local requirements. 

New York has enacted legislation significantly expanding employees' rights to access their personnel records. Governor Kathy Hochul signed Senate Bill S.3460 into law on September 9, 2026. The new law applies to current and former employees and takes effect November 8, 2026. Historically, New York private-sector employees generally did not have a broad statutory right to inspect or obtain their personnel files. The new law establishes a right for current and former employees to request and receive copies of their personnel records.

Under the new requirements:

• Employees may submit a written request for their personnel records, generally up to twice per calendar year.

• Employers generally must provide the requested records within five business days at no cost to the employee.

• The definition of a personnel record is broad and may include employment applications, resumes, job information, compensation information, performance evaluations, disciplinary records, written warnings, termination notices, and other employment-related records.

• Records maintained by a third party under contract with the employer may also be covered.

• If an employer places information in a personnel record that could negatively affect an employee's employment, promotion, transfer, compensation, or potential for disciplinary action, the employer must notify the employee within 10 days.

• Employees may submit a written statement disputing information in their personnel record, and that statement must be included with the record.

• Personnel records must generally be retained from the employee's date of hire through three years after termination.

• The law prohibits retaliation against employees who exercise these rights.

What C2 Clients Should Do

If a current or former New York employee submits a written request for their personnel records, promptly forward the request to the C2 Emerald HR Team for processing and review. C2 will coordinate the response for personnel records maintained by C2 and determine the appropriate method for providing the responsive records. Clients should not independently respond to the request or direct the employee to the HRIS without first coordinating with C2. Clients should also:

• Review what employee records they maintain outside of C2 systems.

• Ensure managers understand that employee personnel-record requests should be promptly referred to C2.

C2 will continue to monitor New York guidance and implementation developments and will provide additional information as appropriate.

Official New York Resources

• New York State Senate – S.3460

• New York State Department of Labor

• New York State Attorney General – Workers' Rights

The U.S. Department of Labor (DOL) recently issued guidance describing how its Employee Benefits Security Administration (EBSA) will focus its enforcement efforts under the Mental Health Parity and Addiction Equity Act (MHPAEA).

MHPAEA generally requires health plans that cover mental health and substance use treatment to provide those benefits on terms that are no more restrictive than the terms that apply to medical and surgical care. For example:

• If a plan requires a copay for a doctor’s office visit, it generally cannot impose a higher copay for a mental health office visit in the same category of care.

• If a plan places limits on the number of medical or surgical visits, similar limits generally cannot be applied more restrictively to mental health or substance use treatment.

• If a plan requires prior authorization for certain medical or surgical services, similar requirements for mental health or substance use services must comply with the same parity standards.

The guidance does not require employers to make changes to their health plans simply because the DOL issued this bulletin. It instead provides insight into the areas EBSA intends to prioritize when conducting MHPAEA investigations. The DOL's updated enforcement approach places particular emphasis on three areas involving nonquantitative treatment limitations (NQTLs). The DOL will focus on whether:

• Mental health and substance use disorder treatments are being excluded when similar medical treatments are covered.

• Mental health and substance use disorder patients face extra requirements, such as prior authorization, that do not similarly apply to medical patients.

• Patients have reasonable access to mental health and substance use disorder providers through the plan's network.

The DOL also clarified that it will continue to enforce the underlying MHPAEA requirements. Plans must continue to maintain required comparative analyses for NQTLs and be prepared to provide those analyses to the federal agencies upon request. The DOL may also investigate other MHPAEA issues that come to the DOL's attention through participant complaints or DOL reviews.

Mental health services are an increasingly important part of employer-sponsored health coverage.

• 22% of employers with 50–199 employees and 48% of employers with 200+ employees reported that the percentage of employees receiving mental health services increased over the prior year in KFF's employer survey.

• In the same survey, 6% of smaller employers and 14% of larger employers reported an increase in employees receiving substance-use treatment.

• More recently, KFF's 2024 Employer Health Benefits Survey found that 23% of employers with 50+ employees took steps to add in-network telehealth providers for mental health or substance-use services, while 14% took steps to add in-person providers.

Many Employee Assistance Programs (EAPs) are treated as “excepted benefits” and are generally not subject to MHPAEA. However, an EAP cannot be used as a more restrictive gateway to mental health or substance use treatment. For example, a health plan generally cannot require an employee to use or exhaust EAP counseling benefits before the employee can access covered mental health treatment under the medical plan if there is no comparable requirement for medical/surgical benefits.

C2 will continue to monitor developments related to MHPAEA and will provide additional information if further guidance results in changes that require client action.

Massachusetts employers now have an additional obligation when responding to an immigration-related records inspection. Under the Massachusetts PROTECT Act, employers with employees working in Massachusetts must provide written notice to each current/active employee within 48 hours after receiving a U.S. Immigration and Customs Enforcement (ICE) notice requesting inspection of I-9 employment eligibility verification forms or other employment records. 

The requirement applies to the workforce generally—not only to employees whose individual I-9 records are included in the inspection request. The law also provides an exception where disclosure is prohibited or otherwise required by federal law.  The law does not prescribe a specific notice form, required wording, or delivery method, giving employers some flexibility in how they satisfy the requirement. 

What Employers Should Do 

Massachusetts employers should review their existing procedures for responding to ICE inspections and ensure that: 

• Any ICE Notice of Inspection or similar records request is immediately escalated to the appropriate HR and/or legal contact. 

  
  

• The date and time the request is received are documented so the 48-hour deadline can be monitored. 

  
  

• A process is in place to prepare and distribute the required written employee notice. 

  
  

• Documentation is retained showing that the notice was provided within the required timeframe. 

Clients should coordinate with their PEO/HR support team regarding the appropriate response to an ICE inspection or I-9 records request.  

Applicable State Law:  Massachusetts General Laws, Chapter 149, Section 19C / PROTECT Act 

Massachusetts PROTECT Act Resources:  Massachusetts PROTECT Act – Mass.gov 

The U.S. Department of Homeland Security (DHS) has proposed a significant increase in the cost of certain H-1B employment petitions.  The proposal was published in the Federal Register on August 24, 2026, and is subject to a 30-day public comment period before DHS can consider issuing a final rule.  The proposal’s final scope and effective date remain subject to change. 

The proposed $103,265 fee follows a $100,000 H-1B payment requirement announced by the administration in 2025. The earlier measure was challenged in federal court, and courts subsequently blocked its collection. The new DHS proposal would establish a substantially similar charge through the federal rulemaking process. 

H-1B workers can be particularly important to contractors competing for specialized technical talent, including positions involving engineering, information technology, cybersecurity, science, mathematics and other specialty occupations. The potential financial impact is substantial. The proposed $103,265 charge would be in addition to other applicable immigration filing costs and legal expenses. For a small or mid-sized contractor, that additional expense could materially affect the economics of hiring or retaining an H-1B worker.  

The H-1B program remains subject to annual numerical limits of 65,000 regular H-1B visas, plus 20,000 additional visas for qualifying individuals with U.S. master's degrees or higher. Demand for the program has also been significant: 

• FY 2023: 483,972 H-1B registrations 

  
  

• FY 2024: 780,884 registrations 

  
  

• FY 2025: 470,342 registrations 

  
  

For a typical employer with more than 25 employees, a standard H-1B petition could be $3,380 broken down as:  

No immediate action is required solely because of this proposal. Employers should, however, consider the potential impact if they regularly recruit foreign nationals or anticipate needing H-1B sponsorship. Employers should:

• Review upcoming hiring plans for positions that may require H-1B sponsorship and consider the potential additional cost when developing recruiting budgets. 

  
  

• Identify current employees or candidates with pending immigration needs and discuss timing with the company's immigration counsel. 

  
  

• Coordinate with finance and program management before committing to H-1B sponsorship, particularly where labor costs are incorporated into government contract pricing or indirect-cost structures. 

  
  

• Avoid making assumptions about the final fee. The $103,265 amount is currently proposed and may change before a final rule is issued. Legal challenges are also possible. 

  
  

Government Resources 

• U.S. Department of Homeland Security – Federal Register Proposed Rule 

  
  

• USCIS – H-1B Specialty Occupation Information 

  
  

• USCIS – H-1B Program 

Employers should be aware of recent congressional activity concerning federal workplace heat-safety requirements. The Heat Workforce Standards Act of 2026 (S. 4427) has been introduced in the U.S. Senate, with companion legislation H.R. 6213 advancing in the House. The legislation would prohibit the U.S. Department of Labor from finalizing, implementing, or enforcing OSHA’s proposed heat injury and illness prevention standard, as well as substantially similar future standards. 

The legislation has not become law. Employers should therefore continue to monitor developments, but no new nationwide OSHA heat-specific standard is currently enforceable. 

What Is OSHA’s Current Position? 

Even though there is currently no federal OSHA-specific heat standard, employers still have obligations under OSHA's General Duty Clause of the Occupational Safety and Health Act. OSHA may investigate heat-related conditions as part of an employee complaint, an OSHA inspection, or other enforcement activity. If OSHA determines that employees are exposed to a recognized heat hazard that is causing or likely to cause serious physical harm and that feasible measures exist to address the hazard, the employer may be cited under the General Duty Clause. 

In August 2024, OSHA published a proposed Heat Injury and Illness Prevention in Outdoor and Indoor Work Settings standard. The proposal would generally require employers to establish a written heat injury and illness prevention plan and implement measures addressing heat hazards, including hazard identification, heat controls, acclimatization, employee and supervisor training, and emergency response. The proposal would apply broadly to general industry, construction, maritime, and agricultural workplaces. 

Because the proposal has not been finalized, employers are not currently required to comply with the proposed federal standard solely because it was published. 

State Heat-Safety Requirements Remain in Effect 

Several states have adopted their own workplace heat requirements. Requirements vary considerably by State and may apply to outdoor work, indoor work, or both. 

• California requires heat-illness prevention measures for outdoor workplaces and, since 2024, most indoor workplaces where temperatures reach 82°F. Requirements include water, shade or cool-down areas, rest, training, and written procedures. 

  
  

• Maryland's heat-stress standard, effective September 30, 2024, applies when the heat index reaches 80°F or higher and includes requirements for monitoring, written prevention and management plans, and high-heat procedures. 

  
  

• Minnesota has an indoor heat standard based on work activity and Wet Bulb Globe Temperature (WBGT). Minnesota OSHA confirms that there is currently no Minnesota or federal OSHA standard specifically addressing outdoor heat. 

  
  

• Oregon requires heat-illness prevention measures when the heat index reaches 80°F, including water, shade, rest, acclimatization, training, communication, and emergency planning. Additional requirements apply above 90°F. 

  
  

• Washington's outdoor heat rules generally begin at 80°F and include water, shade or cooling methods, preventative cool-down periods, employee observation, and additional mandatory cool-down periods at 90°F and 100°F. 

  
  

Recommended Employer Action 

Government contractors and other employers with employees working across multiple states should: 

• evaluate heat exposure based on the employee's work location and applicable state requirements 

  
  

• maintain reasonable heat-safety practices appropriate to their operations, particularly for employees performing outdoor, physically demanding, or work in areas without effective climate control 

  
  

• at a minimum consider access to drinking water, appropriate rest or cool-down opportunities, shade or other cooling methods, employee training, acclimatization for employees new to hot conditions, and procedures for responding to signs of heat illness 

C2 Essentials will continue monitoring the federal legislation and developments affecting state heat-safety requirements. Additional guidance will be provided if the federal legislation advances or OSHA's proposed rule changes. 

The U.S. Department of Homeland Security (DHS) is considering a regulatory change that could affect employers with H-1B employees. DHS has submitted a proposed rule that would eliminate the current up to 60-day grace period available to certain nonimmigrant workers after their employment ends. 

The proposal has not yet been published in the Federal Register, and the current 60-day grace period remains in effect. 

Under current rules, eligible H-1B workers may have up to 60 days—or until the end of their authorized stay, if earlier—to pursue another qualifying employment opportunity, change status, or make arrangements to leave the United States. See USCIS: Options for Nonimmigrant Workers Following Termination of Employment. 

The H-1B program allows U.S. employers to temporarily employ foreign workers in “specialty occupations” that generally require specialized knowledge and at least a bachelor's degree or equivalent in a related field. Common H-1B occupations include IT, engineering, accounting, and other professional and technical roles.

The sponsoring employer generally must file a Labor Condition Application (LCA) with the U.S. Department of Labor and an H-1B petition with U.S. Citizenship and Immigration Services (USCIS), in addition to meeting applicable wage and other H-1B requirements. H-1B status is generally granted for an initial period of up to three years and can typically be extended for another three years. 

Why It Matters to Employers 

The current grace period gives an eligible H-1B employee time to find another employer willing to sponsor the employee and complete the required immigration process. The prospective employer generally must file a new H-1B petition and may incur government filing fees and legal costs as part of the process. 

Without the grace period, an employee whose H-1B employment ends could have significantly less time to find another sponsoring employer and address their immigration status while remaining in the United States. Depending on the circumstances, the employee could have fewer options to transition to another employer without leaving the country. 

This could be particularly significant for government contractors that employ H-1B professionals in specialized positions. 

• A tighter window to hire qualified H-1B talent — Contractors may have less time to identify and secure an H-1B candidate before the candidate's immigration status becomes an issue. 

  
  

• A smaller available talent pool — A qualified H-1B candidate who recently lost employment may have less flexibility to pursue a new position if the grace period is eliminated. 

  
  

• Greater risk to contract staffing requirements — Government contracts may require specific positions to be filled within defined timeframes. Losing a specialized employee or being unable to onboard a qualified replacement quickly could create operational challenges. 

  
  

• More pressure on recruiting and HR — Contractors may need to move quickly on qualified H-1B candidates while coordinating immigration filings, onboarding, and contract-specific requirements. 

  
  

• Additional costs and planning considerations — A new employer may incur immigration filing fees and legal expenses when sponsoring an H-1B worker. 

For government contractors, the impact may be greater when positions are subject to U.S. citizenship, security-clearance, or other contract-specific eligibility requirements. An H-1B employee cannot move into a position that legitimately requires U.S. citizenship based solely on their H-1B work authorization. If the employee's current position ends, the pool of positions available to that employee may therefore be more limited. 

Citizenship Requirements 

Government contractors should not assume that all positions may be limited to U.S. citizens. A citizenship requirement must generally be supported by a specific law, regulation, executive order, or government contract requirement. For example, a federal contract may require certain positions to be filled by U.S. citizens, and certain security-clearance requirements may impose citizenship restrictions.

Employers should identify the specific legal or contractual basis for the requirement rather than assume that every position involving a security clearance is automatically limited to U.S. citizens. Where a position is legitimately restricted to U.S. citizens, an H-1B employee would not be eligible for that position based solely on their H-1B work authorization. 

What Employers Should Do 

No immediate action is required. Employers should continue following current H-1B requirements but may want to: 

• Identify H-1B employees in critical or difficult-to-fill positions. 

  
  

• Consider immigration implications when planning terminations or workforce reductions. 

  
  

• Consult immigration counsel before terminating an H-1B employee. 

  
  

• Monitor the proposed rule and any changes to the current grace-period requirements. 

  
  

The 60-day grace period remains in effect today. However, employers that rely on H-1B talent should be aware of the proposed change and consider its potential impact on staffing and contract continuity.