A year after the most significant wave of employment law changes in recent memory, most U.S. dealerships still have compliance gaps. Here's where they are — and what to do about them.

2025 was one of the busiest years in recent memory for employment law. New federal regulations, court decisions that reversed earlier rulings, and a fresh wave of state-level wage and leave expansions reshaped the HR landscape for U.S. employers — including automotive dealerships.

Now that we're in 2026, the dust has settled. These aren't changes on the horizon. They're already in effect. And based on what we're seeing across dealership groups, a significant number of HR teams, GMs, and dealer principals are still operating with policies, processes, and documentation that haven't caught up.

That gap is where liability lives.

Here are four areas where U.S. dealerships are most exposed heading into 2026 — and the concrete steps to close each one.

1. The FLSA Overtime Threshold Reversal — And Why It Still Creates Risk

If you spent part of 2024 preparing for the Biden administration's proposed increase to the FLSA overtime exemption salary threshold, you watched a federal court in Texas vacate that rule before it took full effect. The threshold reverted to $35,568 per year — where it has remained.

For many dealerships, this created organizational whiplash. Compensation adjustments were made, then reconsidered. Classification reviews were started, then shelved. The result in a lot of organizations: an incomplete audit trail and lingering misclassification risk that nobody has formally resolved.

Here's the practical reality heading into 2026: regardless of where the threshold sits today, the underlying classification question hasn't gone away. If you have salaried employees — managers, F&I professionals, department leads — who are classified as exempt but whose actual job duties don't meet the FLSA's duties tests, the salary threshold is almost irrelevant. The exposure exists regardless.

What to do now:

• Complete a full duties-test audit for every exempt employee, not just a salary check
• Document your classification rationale in writing — this is your first line of defense in a DOL inquiry
• Build a process to re-audit classifications annually, particularly when roles change
• Ensure your HR system maintains a record of classification history, not just current status

2. PWFA Accommodations: A Year In, Most Dealerships Still Aren't Ready

The EEOC's final regulations implementing the Pregnant Workers Fairness Act (PWFA) took effect in June 2024. We're now well over a year in — and EEOC enforcement data shows that accommodation-related charges continue to climb.

The PWFA requires employers with 15 or more employees to provide reasonable accommodations for limitations related to pregnancy, childbirth, and related medical conditions. Critically, this includes conditions that are temporary, episodic, or expected to resolve — a significantly lower bar than the ADA has traditionally required.

In a dealership environment, where roles in service, the lot, and the showroom carry genuine physical demands, the PWFA isn't abstract. It requires that managers know what to do when an accommodation request comes in, that there's a documented intake and response process, and that decisions are consistent across locations.

What we've found is that most dealerships that haven't been directly challenged yet haven't built that process. The risk is real: the EEOC has made PWFA enforcement a stated priority, and damages can reach up to $300,000 for employers with 500 or more employees — with smaller employers facing scaled liability as well.

What to do now:

• Audit your current accommodation request workflow — does one formally exist?
• Train all frontline managers and supervisors on PWFA obligations (this training should be documented)
• Update job descriptions to accurately reflect physical requirements, which affects what "reasonable" means in your context
• Standardize your response timeline — the PWFA expects a good-faith interactive process, not an indefinite delay

3. OFAC's 10-Year Retention Requirement: Still Being Missed

Effective March 2025, the statute of limitations for OFAC (Office of Foreign Assets Control) violations doubled from five years to ten. For dealerships, which are required to conduct OFAC sanctions screenings on transactions, this means deal documentation must now be retained for twice as long as before.

This one often gets missed because it looks like a finance or operations issue. But the document management and policy implications run through HR and compliance operations. If your retention policy hasn't been updated, you're holding records on an outdated schedule — which creates audit risk even when the underlying transactions were fully compliant.

What to do now:

• Update your written document retention policy to reflect the 10-year requirement
• Confirm that your DMS and compliance systems can store and retrieve records for the full retention window
• Brief the relevant team members — F&I managers, office managers, compliance coordinators — on what the change means for their workflows
• If you haven't conducted a retention audit recently, schedule one for Q1 or Q2 2026

4. Multi-Jurisdiction Compliance: January 1, 2026 Brought Another Round of Changes

For dealer groups operating across state lines, January 1, 2026 brought yet another wave of employment law updates — minimum wage increases, paid leave expansions, and in some jurisdictions, new predictive scheduling requirements.

Around 19 states and 22 local jurisdictions increased their minimum wage at the start of 2026. Several expanded mandatory paid leave programs. States like California, Colorado, Illinois, and New York continue to layer in requirements that go well beyond federal baseline protections — and these apply to every employee in those jurisdictions regardless of your corporate policies.

The compliance failure mode for multi-rooftop groups is almost always the same: a national HR policy that was built around federal law and never systematically updated for jurisdiction-level variation. The dealership in Atlanta and the one in Denver are operating under meaningfully different legal requirements — and treating them identically is a documented source of wage-and-hour exposure.

What to do now:

• Build or update a jurisdiction-by-jurisdiction compliance inventory for every location you operate in
• Confirm that January 1, 2026 wage increases have been correctly implemented in payroll for all affected jurisdictions
• Review your paid leave policies against current requirements — this is one of the fastest-evolving areas of employment law
• Invest in HR technology that maintains jurisdiction-aware policy rules at the employee level, not just the company level

Compliance Isn't a Once-a-Year Conversation

The dealerships that manage compliance well in 2026 aren't the ones with the biggest legal budgets. They're the ones that have stopped treating compliance as a calendar event and started building it into how they operate every day.

That means documented processes, manager training with paper trails, HR systems that flag issues before they become claims, and a commitment to closing gaps proactively — not reactively.

For dealerships that are still working off spreadsheets, outdated handbooks, and manual tracking, the risk isn't theoretical. It's accumulating right now, one undocumented accommodation request or misclassified exempt employee at a time.

Built for Dealership HR. Built for What's Coming Next.

HR4 was purpose-built for automotive dealerships — which means our compliance tools are designed around how dealerships actually work, not how generic HR software assumes they do.

Accommodation tracking, jurisdiction-aware policy management, compliance training workflows, and digital audit trails are built into the platform so your team doesn't have to build them manually.

Want to see what a compliant HR operation looks like at a dealership your size? https://hr4.com/demo.html

HR4 is the all-in-one HR platform purpose-built for automotive dealerships. Supporting over 1,000 rooftops across North America, HR4 helps dealer principals, GMs, and HR teams hire faster, reduce turnover, and stay compliant — without the manual lift.