California Employers Face New AI and Automated Decision System Employment Regulations Effective October 1, 2025
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- 2 days ago
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Employers in California are increasingly using automated screening applications, which can include algorithms or artificial intelligence, to aid a wide range of decisions related to job applicants or employees, such as recruitment, hiring, and promotion. But these automated processes can have embedded biases that might, for example, pass over women for promotion, direct Black workers to certain kinds of jobs, or adjust salaries and wages to pay men more than similarly situated and skilled coworkers.
To protect the California workforce from unlawful discrimination and similar unlawful employer conduct by way of algorithm, artificial intelligence, or other automated processes, the California Civil Rights Department (formerly the Department of Fair Employment and Housing) has promulgated new regulations governing the use of algorithms, artificial intelligence, and other automated decision-making systems in employment, will take effect on October 1, 2025
If you have questions about California’s new AI employment regulations or need legal support tailored to your business, please contact our Partner, Fiona Xu, at contact@consultils.com.
What is an Automated-Decision System?
The new regulations define the term “Automated-Decision System” as follows:
“Automated-Decision System.” A computational process that makes a decision or facilitates human decision making regarding an employment benefit, as defined in section 11008(i) of these regulations. An Automated-Decision System may be derived from and/or use artificial intelligence, machine-learning, algorithms, statistics, and/or other data processing techniques.
Note that an automated-decision system need not be completely self-contained and self-executing, but instead, need only assist human decisionmaking. It need not actually make decisions, or propose them. Simply aiding an employer in determining an employment benefit as defined under section 11008(i) of the California Code of Regulations, Title II, by way of data processing techniques, is enough.
What the ADS Regulations Require?
The new framework imposes several key obligations on employers:
Notice and Transparency: Employers must provide clear notice to applicants and employees whenever AI tools or automated processes are used in employment-related decisions. Workers are entitled to meaningful information about how such systems operate and the factors considered.
Bias and Discrimination Safeguards: Employers must conduct regular testing and audits to identify potential disparate impacts, and must maintain records documenting steps to mitigate bias.
Data Privacy and Security: Personal and sensitive information processed by AI tools or other automated processes must be protected in compliance with California’s privacy laws.
Human Oversight: AI or an algorithm cannot be the final or exclusive decision-maker. Employers must ensure that qualified personnel conduct meaningful human review before making employment determinations.
Recordkeeping: Employers must retain documentation of AI or ADS use, testing, and compliance efforts, and provide access to regulators upon request. Employers must retain such records for 4 years.
What Employers Should Do?
With the October 1, 2025 effective date approaching, California private employers should act quickly to ensure compliance:
Audit AI systems: Review all current and planned AI-driven tools used in recruitment, HR, and workforce management (e.g., résumé screening software, automated video interview platforms, productivity or performance monitoring tools, and predictive analytics used in promotions or terminations).
Update policies: Create written policies on AI usage, including notice, data handling, and employee rights.
Conduct bias testing: Establish regular audits of AI systems to identify and mitigate potential disparate impacts.
Train HR teams: Ensure managers and HR staff understand both the limits of AI tools and the new legal requirements.
Build oversight mechanisms: Document procedures for meaningful human review in all employment decisions influenced by AI.
The regulations respond to growing concerns that AI systems may perpetuate bias, lack transparency, or compromise worker privacy. Employers across industries should take these requirements seriously. Not only to avoid penalties, but also to build trust with employees, ensure fairness in decision-making, and strengthen compliance practices in an evolving regulatory landscape.
If you have questions about California’s new AI employment regulations or need legal support tailored to your business, please contact our Partner, Fiona Xu, at contact@consultils.com.
Disclaimer: The materials provided on this website are for general informational purposes only and do not, and are not intended to, constitute legal advice. You should not act or refrain from acting based on any information provided here. Please consult with your own legal counsel regarding your specific situation and legal questions.
Fiona Xu, Esq. is the Partner and Head of Transactions of ILS.
She has extensive experience supporting global and high-growth technology companies on compliance and business needs. Her practice focuses on regulatory compliance across different sectors, with a focus on sector-specific regulations for artificial intelligence (AI) and medical devices. She supports multinational corporations in establishing and maintaining U.S. operations, managing legal and compliance challenges in various areas such as Privacy, Export Control, and CFIUS issues.
Email: contact@consultils.com | Phone: 626-344-8949