818.501.4343May 7, 2025
For years, California has been a leader in worker protection laws and data privacy. But sometimes legislators overcorrect, and that can have some major consequences for employers.
Unfortunately, those overcorrections can take years to walk back, and business leaders are left to deal with the unintended consequences of broad legislation and strict bills. Some fear this is what’s happening with new employer AI regulations aimed at addressing discrimination in the workplace.
The California Civil Rights Council just finalized new AI regulations on when and how employers can use AI and so-called “automated decision-making systems” to help prevent employment discrimination in hiring and other aspects of working environments.
The Office of Administrative Law still has to approve the new rules. If they do, the regulations will go into effect by the end of 2025.
While the overall outcome of this legislation should create a more equitable hiring environment, it could also impact your business. Here’s everything you need to know, including how an employer lawyer can help.
Major Concerns About Employment Artificial Intelligence (AI) Tools
Why are state legislators and job seekers so worried about AI for hiring? Shouldn’t AI make hiring faster, more efficient, and fairer for all? In theory, yes. But there are some legitimate concerns, including:
Implicit Bias
AI is only as good as the data it’s trained on. If algorithms are fed bad data, they’ll carry on implicit bias.
Several companies have already found themselves in hot water over allegations of biased AI screening software. Workday, a cloud-based enterprise resource planning and human capital management platform, is one such company.
In mid-2024, a U.S. District Judge in California ruled that Workday can be treated as an employer and is subject to federal laws that prohibit workplace discrimination. While some allegations were eventually dismissed, the court’s ruling shows judges are willing to hear AI bias claims.
“Blind” Hiring
Another concern is employers will turn AI loose and let it make initial screening and hiring decisions without human oversight.
AI and automated decision-making tools are meant to make work easier, not replace human input. Blind hiring would allow biased algorithms to go unnoticed and harm job seekers from diverse backgrounds.
Data Privacy
California has some of the toughest data privacy laws in the country. While much of the California Civil Rights Council’s work focuses on biased AI, data privacy is also a concern. “Black box” AI that generates outputs without explaining how data is used or where it goes could put job seekers’ privacy at risk.
What the New Regulations Mean in California Law
The most important parts of the final regulations focus on automated decision systems.
The final definition is narrower than the initial proposal and includes the following language: “a computational process that makes a decision or facilitates human decision-making regarding an employment benefit.” The bill covers any process that is derived from or uses AI, algorithms, data processing, statistics or machine learning.
As an employer, you must ensure your AI tools don’t have disparate impacts on protected classes. You must also disclose the use of automated decision-making technology in your hiring process, provide information on how it works, and retain all relevant records regarding hiring, screening, and employment decisions.
You must document the required information on annual California Employment Information Reports (CEIRs) and retain those reports for a minimum of four years from the date of the CEIR.
What This Means for Your Business
If the new bill passes, it could have big implications for your organization. All of the following are possible:
Increased Compliance
If you’re already using AI for hiring and screening, you’ll need to implement new safeguards to monitor those technologies. This will add to your compliance burden and require outside IT support.
If you haven’t implemented AI-powered hiring tools yet, you’ll need to factor in these additional costs before moving forward with your implementation.
Legal Risk
Failure to comply with the new law could expose your business to lawsuits and regulatory penalties. Even if you source AI tools from a third-party vendor or outsource the entire screening process, your company could still be liable for discriminatory outcomes.
Slower Hiring and Promotion Processes
Reconfiguring your AI and automation tools will take time and resources. While you do that, you may have to limit or discontinue your use of AI in candidate selection, which could slow down your hiring and promotion processes.
While temporary, these delays can have big consequences for your business.
Reputational Damage
Even an accusation of biased hiring can harm your company’s reputation and make it harder to attract diverse candidates. Rebuilding your image can take months or even years if there are multiple or repeated allegations.
So, it’s important for employers to work with a lawyer to minimize reputational damage.
How Lawyers for Employers Can Help Your Business
A lawyer for employers can help you adjust to California’s new AI regulations by providing the following legal services:
Risk Assessment
Lawyers for employers can review your existing employment practices and AI tools to identify risks. They can help you find and fix any issues that could leave your business open to biased hiring claims.
Regulatory Compliance Support
An experienced employer attorney can help your business interpret and implement California’s new rules, create new policies for your HR department and draft employee disclosures.
Training
Your legal team can develop training programs for your HR staff and hiring managers on the legal use of AI in employment decisions. They can also prepare necessary documentation to demonstrate compliance in the event of a lawsuit.
Legal Defense
Your employment defense lawyers can represent you in any administrative or court proceedings. They’ll build your case and defend you against false or exaggerated claims.
Protect Your Business and Contact a Lawyer for Employers Today
If you have questions about California’s new artificial intelligence employment laws, contact a lawyer for employers today. By being proactive, you can preserve your reputation and avoid headaches related to compliance.
Call Pearlman, Brown & Wax, LLP to speak with employment law attorneys who can help you protect your business and navigate AI regulation updates.