California’s AI Regulations Effective October 1

Remember “Rosie the Robot” from The Jetsons? While the popular show aired in the 1960s, it was set in 2062, with a plethora of futuristic advancements from flying cars and holograms, to helpful robots, like Rosie. Rosie took care of household chores such as cooking, cleaning, laundry, and childcare. With advancements in Artificial Intelligence (AI), it’s not difficult to imagine a world like this in another 40 years!

However, there is a downside to technological advancement, particularly when it is misused, even inadvertently. California’s Civil Rights Department (CRD) recognized these risks and passed regulations aimed at addressing potential discrimination when AI tools are used to make personnel decisions, such as screening applicants. These regulations are effective October 1, 2025. Below are key insights for California employers.

CRD’s Prohibitions on Automated-Decision/AI Tools

The regulations address the use of automated decision-making systems (ADS), like artificial intelligence, in employment. An “ADS” is defined as any “computational process that makes a decision or facilitates human decision making . . . [through] artificial intelligence, machine learning, statistics, and/or other data processing techniques.”

The regulations clarify the following:

• The FEHA applies to AI: California’s antidiscrimination laws (e.g., FEHA) apply to discrimination caused by the use of artificial intelligence/automated-decision-making systems. Both employers as well as third parties that sell automated decision systems could be held liable.
• AI tools may result in “adverse-impact” discrimination: Employers may be liable even if they did not intentionally use AI to discriminate. For example, an employer and its agents would be liable if the AI tool resulted in an “adverse impact” on a protected group (e.g., disproportionately screened out a certain race, age, gender, etc.), when it is not job-related and consistent with business necessity.
• AI alone is insufficient for individualized assessments: California employers with 5 or more employees are required to conduct an “individualized assessment,” assessing certain factors, before denying an applicant a position based on their criminal history. The regulations clarify that using an automated decision system alone is insufficient to satisfy the individualized assessment process.
• AI cannot be used for medical or psychological inquiries: The regulations clarify that most medical or psychological exams or inquiries are still prohibited when using an automated decision-making system.
• Record retention is required: The regulations require employers to hold on to AI-related records for at least four years. This includes application, selection criteria, automated decision system data, and other records created or received by the employer that affected any employment benefit, applicant, or employee.

What Else Should Employers Consider?

Aside from proceeding with caution in using AI tools for hiring and employment decisions, employers should also consider whether—and to what extent—they want employees using AI to carry out their job duties. This can raise questions regarding confidentiality issues, protecting proprietary information, the quality and accuracy of employee work product, and other concerns. CEA members can get started with our downloadable Sample AI Policy.

This is likely not the end of AI regulation in California. A pending bill, SB 7, known as the “No Robo Bosses” bill, if passed, would impose major restrictions on employer uses of AI. For example, employers relying on AI would have to provide specific notices to employees, independent contractors, and applicants, and workers would have a right to request AI data related to them. Employers would not be able to rely solely on AI when making a discipline, termination, or deactivation decision, and would have to incorporate human review.

California employers will have to stay tuned!