Employment Recruiting Will Be Hit by New Connecticut AI Law

Beginning October 1, 2027, employers using AI for recruiting and other employment practices will have new obligations under an expansive Connecticut law regulating the use of Artificial Intelligence. The Connecticut Artificial Intelligence and Transparency Act (“CART Act”), Public Act 26-15, was signed into law on May 27, 2026. 

The Act applies to all “automated employment-related decision technology” (“AEDT”). “AEDT” is defined in the Act as “any technology that processes personal data and uses computation to generate an output that is “a substantial factor used to make or materially influence an employment-related decision.” In other words, any technology that uses an individual’s personal information and produces a result that plays an important role in making employment decisions on whom to hire, interview, promote, discipline, terminate or how to evaluate employees. With electronic recruiting becoming the method many, if not most, employers use today, the impact will be sweeping.

Notice Requirements for AI Used in Employment Decisions

Beginning October 1, 2027, employers and other entities that use automated employment-related decision technology in Connecticut will be required to inform employees and applicants when AI tools are used.

First, employers must disclose to employees and applicants that they are interacting with AEDT, unless it is obvious that they are doing so. 

In addition, employers who use AEDT, or the information generated by AEDT to make employment-related decisions, must provide certain disclosures to the employee or applicant before the decision is made. This disclosure must include:

• The employer’s contact information;

• The trade name of the AEDT;

• The fact that the employer is using AEDT;

• The purpose of AEDT use and the nature of the employment decision (for example, whether it is a hiring decision);

• The categories of personal data that the AEDT will analyze and how it will be assessed in reaching a decision; and

• The sources of that personal data.

An employer can transfer these responsibilities to its AEDT vendor by contract.  Employers using outside electronic recruiting platforms should confer with their service concerning the notice requirement.

The law permits the Connecticut Attorney General to pursue claims for unfair or deceptive trade practices for failure to provide the required disclosures.

AI WARN Notices

In addition, employers undergoing a plant closing or mass layoff covered by the federal Worker Adjustment and Retraining Notification Act (“WARN Act”) must inform the Connecticut Department of Labor if the plant closing or mass layoff is related to the use of AI or “another technological change.” These WARN-specific provisions take effect on October 1, 2026. 

The WARN Act applies when, during any 90-day period, a private businesses with more than 100 full-time employees:

• Closes a worksite that will impact at least 50 people at a single site of employment;

• Plans to lay off at least 33% of their workforce at a single site of employment, so long as the layoffs will impact a minimum of 50 employees; or

• When planned layoffs will affect 500 or more employees at a single site of employment.

AI Discrimination

Finally, the Act amends the Connecticut Fair Employment Practices Act, explicitly stating that using AEDT is not a legal defense against employment discrimination claims.

Federal Court Axes $100,000 Employer H-1B Petition Fee (For Now)

On Monday (June 8th), a federal judge struck down the $100,000 H-1B fee that has been in effect since September 2025.

H-1B visas permit U.S. employers to temporarily employ foreign workers in “specialty occupations” that require highly specialized knowledge and at least a bachelor’s degree. It is most commonly used to hire workers in fields like technology, engineering, and medicine. The fee for H-1B petitions had capped out at $5,000 until a September Presidential Proclamation increased that fee to an unprecedented $100,000.  Many employers, particularly smaller employers who may use a few H1-B employees, found themselves priced out of the labor market by the $100,000 price tag.

The ruling comes after a coalition of 20 states challenged the fee increase as unconstitutional in federal district court in Massachusetts. Citing U.S. Supreme Court rulings maintaining that the president can only impose a tax or penalty when explicitly authorized by Congress, the district court held the H-1B increase lacked congressional authorization. 

For now, the $100,000 fee has been vacated in its entirety and H-1B fees revert to the levels predating the Proclamation. However, the government has indicated that it intends to appeal the decision. Accordingly, employers who use H-1B workers should be mindful of potential developments.

Inflation Rises to Highest Level in Three Years

Inflation hit a 3 year high in May, according to data released today by the federal Bureau of Labor Statistics. The annual rate for the cost of goods accelerated to 4.2%, up from 3.8% in April, and 2.4% in January. According to the Bureau of Labor Statistics, the increase is largely driven by the energy shock stemming from the Iran war, with gas prices up 40.5% from one year ago. The increase in energy costs accounts for more than 60% of the monthly increase in goods for the month of May. 

The sharp rise in inflation puts renewed pressure on the ability of employees and employers alike to keep up with rising costs and makes it less likely that the Federal Reserve will cut interest rates on borrowing, with some analysts now predicting that high inflation and a strong labor market will result in the Federal Reserve raising rather than lowering interest rates. 

U.S. DOL Proposes New Joint Employment Test Under FLSA; Comment Period Closes June 22nd

An employee from a staffing service who is working at your company, and who is paid by that staffing service, claims that he or she should have been paid overtime. Could your company be liable? The answer is probably, but because there is an inconsistent patchwork of laws and regulations that define “joint employment,” there isn’t a clear answer.

On April 22, 2026, the U.S. DOL announced a rule to create a single nationwide standard from multiple federal laws for when two or more employers can be jointly liable for workplace offenses. Public comment on the proposed rule closes on June 22, 2026. The proposed joint employment test would apply to the Fair Labor Standards Act (FLSA), the federal Family and Medical Leave Act (FMLA), and the Migrant and Seasonal Agricultural Worker Protection Act (MSAWPA). 

There is currently no active DOL regulation defining the FLSA joint-employer test. The standard for determining joint employment has largely derived from federal court decisions applying the FLSA’s broad definition of “employ” (“to suffer or permit to work”), resulting in different tests being applied in different federal circuit courts.

While the first Trump Administration proposed a joint employment test under the FLSA in 2020, it was then partially struck down in federal court and later repealed in 2021 by the Biden Administration. The rule now being proposed would apply to the FMLA, MSAWPA, in addition to the FLSA.

The 2026 Proposed Test

The proposed rule focuses on two joint employment scenarios: Vertical joint employment and horizontal joint employment. In vertical joint employment, the worker has one job position, but two employers benefit. For example, there may be a vertical joint employment relationship between the staffing agency that employs a temporary worker and the company where that worker is placed to work temporarily.

Horizontal joint employment occurs when a n employee works separate hours for two distinct but related employers during the same workweek, such as where a restaurant manager works at two restaurants under common ownership in the same week.

Vertical Joint Employment Test

Under the proposed test for vertical joint employment, the DOL will assess whether the putative joint employer:

• Hires or fires the employee;

• Supervises and controls the employee’s work schedule or conditions of employment to a substantial degree;

• Determines the employee’s rate and method of payment; and

• Maintains the employee’s employment records. (Records related to compliance with the entities’ contractual agreement are not considered employment records for this purpose.)

These are the same factors proposed under the stricken 2020 rule, but with some important substantive differences: 

• Under the 2020 rule, for a joint employment relationship to exist, the rule generally required an employer to exercise actual control over the employee. The federal court that struck down the 2020 rule had found the actual control requirement at odds with the broad language of the FLSA. With that ruling in mind, the 2026 rule now states that an entity’s contractual right to control the worker’s activities, rather than actual control, may be considered. However, the entity’s actual exercise of control is more determinative in analyzing joint employer status. 

• The 2026 proposed rule provides that additional factors evaluating a worker’s economic dependence on the joint employment relationship may be considered, but “should carry less weight” than the four-factor test. The 2020 rule provided that “no factors should be used to assess economic dependence,” a provision that the district court had also rejected.

• The 2026 rule also states additional factors may be relevant, but the four-factor test carries more weight. These additional considerations include whether a worker has a continuous or repeated relationship with the potential joint employer; whether the employee works at a location or facility that is owned or controlled by the potential joint employer; and indicia of whether the potential joint employer exercises significant control over the terms and conditions of the employee's work. The 2020 rule allowed for consideration of additional factors only to the extent they reflected an employer’s exercise of “significant control over the terms and conditions of the employee’s work.”

Horizontal Joint Employment

In assessing horizontal joint employment, the rule provides that employers will be considered sufficiently associated for joint employment purposes, if:

• There is an arrangement between them to share the employee’s services;

• One employer is acting directly or indirectly in the interest of the other employer in relation to the employee; or

• They share control of the employee, directly or indirectly, by reason of the fact that one employer controls, is controlled by, or is under common control with the other employer. Such a determination depends on all of the facts and circumstances.

The public comment period on the rule closes on June 22, 2026, after which the DOL will review the comments before publishing a final rule. It may be prudent for employers entering into agreements with staffing agencies to review those agreements with this rule in mind.

From the Employment Lawyer’s Desk

Q. If we have some employees, both hourly and salary, working on July 4th, what do we have to pay them?

A. It depends on two things: Your company policy and, to a lesser extent, the state in which they work. The legal foundation is that hourly employees are paid for each hour they work; exempt employees (i.e. salaried employees) are paid their weekly pay in any week in which they render services. Company policies vary. They tend to either provide for extra pay in the form of paying time and a half or double time for working on holidays, or straight time and a paid day off for the employee at a later date. State laws are less of an issue than they used to be. Connecticut does not require extra pay for holiday work. Rhode Island requires many employers to pay eligible non-exempt employees 1.5 times their regular rate for working on certain holidays, including Independence Day (July 4th). Historically, Massachusetts had "Blue Laws" requiring premium pay for certain holiday work, but those premium-pay requirements were phased out and eliminated in 2023.