As in 2025, the first few months of 2026 have seen fashion and retail companies operating in an environment where legal developments increasingly shape day-to-day business decisions, and the same is expected to continue throughout the rest of the year. Tariffs, trade enforcement, and supply‑chain pressures remain a persistent operational reality, even as brands continue to invest heavily in AI, digital commerce, and new consumer‑engagement tools. Simultaneously, regulators and plaintiffs’ attorneys are paying closer attention to e-commerce practices, advertising disclosures, social media and music use, chatbots, and data privacy.
Sustainability obligations are expanding through extended producer responsibility programs, per- and polyfluoroalkyl substance (“PFAS”) restrictions, and climate‑related disclosure laws, while labor, employment, and immigration issues continue to affect workforce planning and mobility. Financial stress across the retail sector, evolving private equity activity, increased bankruptcy filings, and renewed Proposition 65 enforcement add further complexity.
Part II of this Top Legal Issues alert from attorneys at ArentFox Schiff highlights the issues most likely to affect cost, growth, and risk allocation for fashion and retail companies in 2026 – and the areas where leadership teams should be paying close attention …
6: Private Equity Partnerships: Navigating Scale, Technology & Brand Identity
As economic volatility, tariff uncertainty, and rising technology costs continue to shape the fashion landscape, private equity (“PE”) activity in the U.S. fashion sector is expected to remain strong in 2026. PE interest is particularly robust among mid-market apparel and accessories brands, where scale synergies and shared services can create immediate margin and working-capital advantages. For founder-led labels, PE partnerships can unlock access to better supply chain terms, enterprise-grade AI platforms, and operational infrastructure that would otherwise be unaffordable, helping smaller brands compete on technology while expanding into new regions and product lines.
Brands considering PE investment should carefully assess alignment with their long-term vision and brand authenticity. While most founders are comfortable ceding control on back-end operations like manufacturing and distribution, friction can emerge when investors seek involvement in design, marketing, or assortment decisions. Brands should also be mindful of the growing trend of PE-to-PE transactions, where ownership may change hands multiple times as firms pursue different value strategies. A well-negotiated agreement with appropriate guardrails can help protect creative control, distribution strategy, and brand integrity through these transitions.
Authors: Felicia Xu, Erica Roque
7: Labor & Employment
> Noncompete Agreement Enforcement
The enforcement of noncompete agreements will continue to be an evolving landscape in 2026. The FTC enacted a sweeping ban on noncompete agreements in 2024, however, after legal challenges to the ban, the FTC announced at the end of 2025 that it was abandoning the blanket ban and would instead proceed with assessing noncompete agreements on a “case-by-case” basis. In recent enforcement actions, the FTC has stopped the enforcement of noncompete agreements banning employee movement within an entire industry or an entire geographical area with a limited carve-out for high-level executives.
> Prospective Written Meal Period Waivers in California
Class and Private Attorneys’ General Act (PAGA) actions remain prevalent in California, particularly for retail employers who employ a large number of non-exempt employees. Class and PAGA actions often assert a variety of claims of Labor code violations, ranging from meal and rest break violations to noncompliant wage statements to improper calculation of overtime. One hot button issue is compliance with California’s meal break requirements. The California Court of Appeal recently issued a significant decision affirming that employers and employees may mutually agree, in writing, to prospectively waive the employee’s meal period for shifts between five and six hours so long as the waivers are entered into voluntarily and can be revoked at any time.
This decision could be highly favorable for retail employers because, with meal break waivers, employers have more flexibility in the length and scheduling of shifts. In light of this decision, employers should consider implementing the following best practices: (1) use written, standalone meal break waivers; (2) present meal break waivers in a manner that is free from coercion (or the appearance of coercion) with language that is easily understood by employees; (3) communicate the employee’s revocation rights; (4) avoid retaliation against those employees who decline to sign or choose to revoke the meal break waiver; and (5) regularly review all waiver forms and practices with legal counsel to ensure ongoing compliance.
> Restrictions on the Use of AI in Employment Decisions
There has been a rise of legislation and regulations targeting the use of AI in making employment decisions, including hiring, promotions, workplace trainings and workforce reductions. California, one of the leading enactors of AI regulation, has passed regulations targeting the discriminatory impacts of AI. The regulations emphasize the value of conducting bias auditing of AI and require employers to preserve AI-related records and data. New York City has passed similar regulations requiring companies to conduct AI bias auditing.
However, a recent federal Executive Order established an AI Litigation Task Force, which is set to review state AI laws related to AI bias in 2026. Employers should be aware of how this EO could affect state regulations and the changing regulation related to the use of AI in growing or reducing its labor force to ensure compliance across all jurisdictions.
Authors: Jeff Weston, Amanda Peterson
8: Social Media & Music
Brands often desire to use trending or charting music in their social media posts. The use of popular music can signal cultural relevance, capitalize on viral moments, and create greater exposure to social media posts because of the way a social media platform’s algorithms work. However, using music in a brand’s or a brand influencer’s social media posts without the appropriate commercial use licenses in place raises meaningful risks of copyright infringement. Typically, the music contained in music libraries that social media platforms make available to individual users to add to their social media posts can only be used for a non-commercial purpose. Therefore, if music from such a non-commercial music library is used in the social media post of a brand, that use would be a violation of the terms of use and very likely be an infringement of copyrights.
In music, there are two separate copyrights: one in the sound recording (the recorded performance), and one in the musical composition (the underlying music and lyrics) that is performed on a sound recording. Using a track in a social media post implicates both works and the two copyrights. As a result, lawful commercial use of music in social media posts requires licenses that cover commercial use of the sound recording and of the musical composition. That typically requires securing and paying for multiple licenses: a license from the owner of the sound recording (usually a record company), and a license from the owner(s) of the musical composition (usually one or more music publishers).
Most major platforms offer commercial music libraries or catalogs that are pre-cleared for business use on-platform. These libraries typically do not include trending or charting music.
A use is typically “commercial” when a brand posts on its social media account or channel, or when a brand influencer uses music to promote a brand’s goods or services. In addition, a brand’s reposting of user‑generated content that includes copyrighted works can convert an originally non‑commercial use into a commercial one that violates the terms of use and is an infringement of copyrights.
Music companies’ enforcement of their rights in this area has become increasingly common, including by way of litigation in which music companies allege copyright infringement over unlicensed use of music in social media content. Claims commonly include direct copyright infringement for a brand’s posts (including re-posts of individual user posts), and contributory and vicarious copyright infringement related to brand influencer posts. Plaintiffs frequently seek statutory damages of up to $150,000 per infringed work (i.e., $150,000 for the sound recording and $150,000 for the musical composition) for alleged willful copyright infringement.
Authors: Matt Finkelstein, Natasha Weis
9: Immigration
With all the new immigration rules introduced in 2025, fashion industry employers face unique challenges that require open communication with their foreign national workforce, including designers, models, artisans, and creative professionals, to ensure everyone has the knowledge and documents to make informed decisions in the best interest of the company.
The current Administration has prioritized immigration compliance, and fashion industry employers should do the same. Given the industry’s reliance on international talent for shows and design work, companies should conduct proactive I-9 audits and correct I-9 errors to take advantage of the good faith compliance defense in the event of a governmental investigation. Fashion companies should consider enrolling in E-Verify to obtain the presumption of compliance, gain an extra layer of assurance that their workforce is authorized, and run reports to identify if any temporary protected status (“TPS”) or parole employee’s work authorization status has changed, as most TPS and parole programs have been terminated, thereby ending their work authorization.
Fashion houses and agencies should develop protocols detailing how to respond to governmental raids and investigations, including informing store managers, reception and security staff who to contact and what to do. This is particularly important for high-profile fashion events and showrooms where large numbers of foreign national workers may be present.
International travel is the lifeblood of the fashion industry, with employees regularly attending fashion weeks, client meetings, and production facilities abroad. Employees should be instructed to consult with their company contacts before international trips to ensure they are able to go and return as planned, given the many travel bans and delays in Consular visa appointments. Employers should decide how to handle employees who are stranded abroad or ask to work abroad for a lengthy period, which implicates local employment and tax laws.
Companies should consider policies regarding whether employees can take and use company-issued electronic devices on international trips, as governmental officials are now frequently searching these devices. This is especially relevant for fashion companies carrying proprietary designs and trade secrets across borders. Employers should also confirm with their H-1B employees (ex: designers, pattern makers, and technical specialists) that they are in the United States when H-1B petitions are filed and will remain in the United States until fully approved, to avoid the new $100,000 H-1B fee.
The immigration climate is challenging, but fashion industry employers and their global workforce can adapt successfully as long as they remain aware of the changing rules and discuss strategies proactively.
Author: Berin Romagnolo
10: Advertising
One of the most noteworthy recent developments in advertising law is a newly enacted New York law, which takes effect in June, requires advertisers to disclose the presence of “synthetic performers” in their advertising. Under this statute, companies distributing ads to New York audiences — including digital and social media campaigns — must conspicuously disclose when visual or audiovisual ads include an AI-generated fictional human persona. While similar laws are not yet widespread, the statute is as an early regulatory signal: lawmakers are beginning to treat AI-generated commercial content as a distinct risk category requiring transparency. For fashion and retail companies experimenting with AI-generated models, virtual influencers, and other synthetic tools, disclosure risk is no longer theoretical.
Meanwhile, pricing transparency has emerged as a parallel enforcement priority. Federal and state regulators are targeting so-called “drip pricing” practices that obscure the true cost of goods or services at the point of advertising. The FTC’s Junk Fee Rule, which took effect in May 2025, covers live event ticketing and short-term lodging, requiring advertised prices to include all mandatory fees other than reasonable shipping costs and taxes.
Some state laws are broader: California’s Honest Pricing Law and Minnesota’s all-in pricing statute (both of which took effect in 2025) apply across a wide range of goods and services, while additional states including Colorado, Connecticut, Oregon, and Virginia have enacted or are implementing similar requirements.
Although details vary, the regulatory direction is consistent: headline prices that exclude unavoidable charges increasingly carry enforcement risk. For fashion and retail brands, these laws elevate pricing architecture into a core advertising compliance issue for 2026.
Concurrently, the landscape for negative option and auto-renewal marketing remains unsettled but high risk. While the FTC’s widely publicized Click-to-Cancel Rule was vacated by a federal appellate court in July 2025 before it took effect, the decision did not eliminate federal oversight: subscription marketing remains governed by ROSCA and Section 5 of the FTC Act, which continue to anchor enforcement actions challenging deceptive renewal flows and cancellation friction, and the agency has signaled that renewed rulemaking in this area remains possible.
At the same time, enforcement and litigation exposure are heavily driven by state law.
California’s recent amendments to its Automatic Renewal Law, along with new or amended statutes taking effect in 2026 in states including Colorado, Connecticut, Maine, and Maryland, reinforce a longstanding trend toward tighter disclosure and cancellation expectations. The result is a complex and layered regulatory environment in which it is easy for businesses to get caught non-compliant.
Author: Thorne Maginnis
11: Chatbots/CIPA
To paraphrase Prince von Metternich, when California sneezes, America catches a cold. And that certainly appears to be true with respect to the various flavors of California digital slip-and-fall claims making their way to Florida courts recently. These include chat cases, website analytics tracking, as well as newer email pixel claims under the theory that these widely deployed technologies are somehow a “computer contaminant.” One of the double-edged-sword aspects of these cases is that they are often filed in Florida small claims courts, where the stakes are low as a result, but at the same time, a defendant often has to appear in person shortly after service for a case management conference, adding to the anticipated expense.
The Florida Security of Communications Act is modeled after the Federal Wiretap Act and has some more straightforward defenses if you can find your way around the various statutory definitions. Further, Florida has much better – and more consistent – approach to standing in its state courts, consistent with federal Article III requirements of the plaintiff having an actual injury.
Three successful grounds for dismissing these setup claims: (1) to “intercept” a communication under federal or Florida law, one needs to be using an “electronic, mechanical, or other device,” and software or equipment used in the ordinary course of business are excluded from the statutory definitions; (2) both federal and Florida courts have independently interpreted “interception” as requiring third-party interception in transit; and (3) Florida courts also approach injury, or the lack thereof, with common sense and dismiss these cases for lack of standing.
Ultimately, there are certainly defenses to these setup claims in Florida if your company is facing a claim now. But just as importantly, there are also some fairly easy steps that you can take to mitigate the risk of involuntarily paying for a new billboard in South Florida.
Author: Adam Bowser
12: Proposition 65
Prop 65 enforcement targeting thermal receipt paper has increased significantly in recent months, affecting California retailers across multiple sectors, and we expect the same activity to continue into 2026.
Under Prop 65, California’s consumer right-to-know law, businesses that manufacture or sell products in the state must provide warnings when those products contain chemicals identified as causing cancer or reproductive harm. In late December 2024, the Prop 65 warning requirement for Bisphenol S (BPS) went into effect. Since then, plaintiffs’ attorneys have issued hundreds of Notices of Violation to clothing stores, restaurants, coffee shops, supermarkets, and other retail establishments using thermal receipt paper containing BPS. These notices carry exposure for civil penalties and attorneys’ fees, and unresolved matters can escalate into costly litigation after the 60-day cure window expires.
Consumer product companies and retailers can take several steps to mitigate risk. First, companies should confirm their receipt paper is free of both BPS and BPA, transitioning to compliant alternatives if necessary. Second, companies should document the transition to compliant paper by preserving internal communications directing stores to make the change. Third, companies should obtain written certification from receipt paper suppliers confirming the receipt paper is BPS- and BPA-free.
Companies that proactively address emerging Prop 65 enforcement trends are best positioned to manage exposure and avoid costly litigation.
Authors: Lynn Fiorentino, Natalie Tantisirirat
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