AI and Employee Data: What California Employers Need to Know

Artificial Intelligence (AI) tools, like ChatGPT, Claude, Copilot, and many others, have drastically changed how people research and access information. However, California employers and HR professionals may want to think twice before using an AI tool to help them make employment-related decisions, such as who to hire or fire, or whether disciplinary action is appropriate.

California’s AI Regulations

In October 2025, California’s Civil Rights Department issued regulations on employers using “Automated Decision-Making Systems,” including AI tools, for employment-related decisions, aimed at ensuring the use of these tools does not lead to discrimination.

Importantly, the regulation requires employers to retain “any personnel or other employment records” that deal with “any employment practice and affecting any employment benefit of any applicant or employee” for four years from the date the record was created, or the personnel action was taken, whichever comes later.

This includes not only documents like applications, personnel records, and selection criteria, but also any “automated-decision system data,” such as data provided by or about individual applicants or employees, or data reflecting employment decisions or outcomes when using an automated decision system, such as an AI tool, to assist you in making an employment decision.

What Does This Mean for California Employers?

California’s regulation is intentionally broad. Arguably, if an employer uses AI tools (like ChatGPT) to do things like:

• analyze specific employee scenarios,
• draft disciplinary actions or termination rationales for an employee,
• generate decision criteria or scripts used in employment decisions,
• scan resumes and select candidates,

Then the data is shared with an AI tool, and the outputs may be viewed as “employment records” under California’s regulation, requiring retention for at least four years.

Using AI Tools at Your Own Risk

Employers and HR teams should decide if the pros of using AI tools for employment matters outweigh the cons. Many employers may not realize that search history on publicly available AI tools is stored on third-party servers and may also be discoverable in a lawsuit.

There are already cases, such as United States v. Heppner (2026), where courts have held that there is no attorney-client privilege for information shared with AI tools, meaning search history may be used as evidence in a case.

HR Questions?

All levels of membership at CEA have unlimited HR calls with our subject matter experts, Monday through Friday, from 8 am-5 pm. If you have a tricky employee issue, need a sounding board, or just prefer to speak with a human, call us at 800.399.5331.