This study aims to elucidate the influence of China’s new environmental protection law (NEPL) on enterprise labor investment efficiency. The dual combined goals of enhancing the environment and stabilizing employment are central to this investigation. We focus on A-share listed companies between 2010 and 2020. A difference-in-difference (DID) method is applied to experimentally evaluate the NEPL’s influence on heavy-polluting enterprise labor investment efficiency. Results indicate a significant enhancement in heavy-polluting enterprise labor investment efficiency after carrying out NEPL. This conclusion remains robust through various rigorous examinations. Additional research reveals that the NEPL’s influence on heavy-polluting enterprise labor investment efficiency is mediated through mechanisms such as green technology innovation and overcoming enterprise financial restrictions. The positive influence of the NEPL is more pronounced in regions characterized by lower marketization, reduced labor intensity, and a prevalence of SOEs. Moreover, the NEPL predominantly addresses the issue of labor underinvestment, with less apparent impact on suppressing labor overinvestment. This emphasizes its role in alleviating deficiencies in labor investment rather than curbing excessive allocation. In summary, we provide valuable insights into the NEPL’s positive influence on heavy-polluting enterprise labor investment efficiency, particularly in the context of environmental improvement and employment stability.