Labor & Employment Law Daily Wrap Up, EXPERT INSIGHTS—Congress pursues AI legislation once again: What employers should know about competing proposals advancing this week, (Jul 24, 2026)

By David R. Dorey, Richard R. Meneghello, and Braden Lawes of Fisher Phillips, LLP

The two political parties are still pursuing very different visions of what a federal AI law should look like, but it appears that both sides believe they can pass something this year.

Momentum on federal artificial intelligence legislation is building in DC this week amid threats from a federal agency to strike down certain state AI laws. On Monday, President Donald Trump met privately with two key Senate Republicans to push forward legislation that would override many state AI laws. Then on Tuesday, a leading Senate Democrat released his own proposed AI legislative framework covering everything from data centers to worker retraining to national security. The two political parties are still pursuing very different visions of what a federal AI law should look like, but it appears that both sides believe they can pass something this year. Regardless of what Congress eventually passes (if anything), the legislation is expected to impact how your business uses AI in the workplace. What do you need to know about these three developments?

The Republican Track Focuses on Preemption

President Trump met with Senate Commerce Chair Ted Cruz (R-TX) and Sen. Marsha Blackburn (R-TN) at the White House on July 20 to discuss a legislative framework that would preempt state AI laws regulations. The President has been pushing for such a law from Congress since last year, but nothing has been released yet.

Blackburn, who has been leading negotiations with the administration, is drafting a package that would establish federal AI standards while also incorporating child safety and privacy measures, including the Kids Online Safety Act, the NO FAKES Act, and the App Store Accountability Act. She said after the meeting that she wants to “get this agreement across the finish line before the end of the year.”

A draft version of Blackburn’s bill has been circulating since March, but the text is not final and has not yet secured the bipartisan support it would need to pass the Senate. In fact, Cruz admitted that he doesn’t know that the votes are there—preemption is a notoriously difficult issue in Washington. The measure also faces a narrow legislative calendar, with the November midterms limiting how much Congress can actually accomplish this year.

Federal Agency Lays Groundwork for Preemption

Separately, the Federal Trade Commission (FTC) is not waiting on Congress. On July 1, the agency opened a public comment period, running through July 31, on a proposed policy statement addressing whether AI companies are manipulating their systems’ outputs to satisfy state ideological mandates rather than serving consumers honestly. This was specifically requested by the President in a December 2025 Executive Order taking aim at state AI laws in various ways.

The statement focuses on laws like Colorado’s AI Act, arguing that state requirements forcing companies to alter the “truthful outputs” of their AI models could violate Section 5 of the FTC Act and may be “impliedly preempted” where they conflict with federal policy.

The Democratic Track Focuses on AI Impact

While Republicans push preemption, Sen. Mark Warner (D-VA), vice chair of the Senate Intelligence Committee, unveiled the most detailed federal AI legislative package introduced by either party so far. Warner’s Framework for America’s AI Future, released July 21, is built around four themes, each backed by at least one separate bill.

• Infrastructure accountability. The Data Center Tax Accountability and Disclosure Act would require large AI data centers to publicly disclose their energy use, water use, emissions, and backup generation. It would also condition a valuable federal tax benefit (bonus depreciation) on data centers meeting LEED Gold or Platinum sustainability certification.

• Competition and consumer safety. The AI AGENT Act would establish rules for consumer-facing AI agents, including a duty of loyalty to users, data privacy protections, and a new FTC registry of trusted agents. A companion bill, the SAFE AI Act, would create a NIST-led testing process to verify that AI models cannot generate child sexual abuse material or non-consensual intimate images, bar federal agencies from procuring unverified models, and create a private right of action for survivors whose likeness is misused.

• Workforce preparation. The National Workforce Transition Fund would redirect revenue generated by limiting data center tax breaks into worker retraining accounts, tuition assistance, and employer redeployment grants, administered by a board split evenly between employer, labor, and government representatives. A separate bill, the Promoting High-Skilled Doctoral Talent Act, would fund accelerated STEM PhD pathways in response to a reported 15% drop in domestic doctoral program applications this fall.

• National security. The Secure AI Development Act would require NSA-led mandatory testing of frontier AI models before they are deployed, modernize how the government tracks AI-related cybersecurity vulnerabilities, and create a voluntary safety incident reporting system modeled on the aviation industry. This comes on the heels of the release of powerful new AI models that could cause cyber havoc and the escalation of an AI arms race with China.

What This Means for Employers

So, what should employers take from this burst of activity?

Track both proposals—but don’t count anything happening soon. The Republican approach centers on preempting state law, while the Democratic approach centers on testing, disclosure, and worker protections. Any bill that eventually becomes law will likely need to blend elements of both, and it’s doubtful that the two sides will be able to reach a compromise before the midterm elections.

• Don’t pause state law compliance work. Nothing described in this Insight is close to becoming law, so states will continue to be the primary source of AI compliance obligations for the foreseeable future. You should continue to adjust your compliance activities in places like Colorado, California, and Illinois.

• Watch the FTC comment period. It closes July 31 and offers an early signal of how aggressively the administration is willing to lean on agency authority while Congress grinds through legislative proposals. If you want to get involved, reach out to our FP Gov Team for guidance and best practices for submitting comments.

Conclusion

We will continue to track both tracks as they develop and will provide updates as the legislative picture becomes clearer. If you have any questions, contact your Fisher Phillips attorney, the authors of this Insight, any attorney in our AI, Data, and Analytics Practice Group or our Government Relations team. Make sure you are subscribed to the Fisher Phillips Insight System to receive the latest developments straight to your inbox.

David R. Dorey, Richard R. Meneghello, and Braden Lawes

Fisher Phillips, LLP

URL: https://www.fisherphillips.com/

Attorneys: (Fisher Phillips).

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