Trump Signs Executive Order on AI: Major Shift in Employment Compliance Landscape Expected

On December 11, 2025, President Trump signed a major Executive Order on artificial intelligence, directing federal agencies to challenge state-level AI laws—particularly those governing hiring, employee management, and performance evaluation. While the order does not override existing state rules, it signals a strong federal push toward a unified, nationwide regulatory framework. Employers must continue to comply with current local laws as the legal landscape begins to shift.

For businesses, this marks a key moment to prepare for future changes in AI-related employment regulation. Compliance requirements may evolve quickly, and now is the time to assess internal processes, reduce legal risk, and stay ahead of new federal standards. For tailored guidance, contact the ILS legal team at contact@consultils.com—we help employers navigate AI compliance with clarity and confidence.

Key Provisions

The EO does not directly impose new compliance obligations on employers. Instead, it aims to reshape the regulatory landscape through the following key measures:

• National AI Policy Direction：The EO rejects a “patchwork” of state-specific AI regulations and calls for a streamlined, nationwide regulatory framework that minimizes compliance burdens and promotes innovation.

• Creation of Federal AI Litigation Task Force：A new federal task force will review and challenge state laws deemed to “excessively restrict” the use of AI, especially in workplace decision-making such as hiring, evaluation, and surveillance.

• Identification of “Overly Burdensome” State Laws：The Department of Commerce will issue a report identifying state AI laws that significantly increase business compliance costs, such as:

  • Requirements to alter AI outputs;

  • Mandatory disclosure of proprietary information;

  • Regulations that impose additional burdens on multistate employers.

• Federal Funding as a Compliance Lever：Where legally permissible, the federal government may tie funding incentives or restrictions to state-level AI compliance approaches, creating financial pressure on states to align with national policy.

Policy Background

In recent years, states like California, New York, and Colorado have introduced various AI-related laws targeting:

• Potential algorithmic bias and discrimination;

• Transparency in AI-driven hiring and performance evaluations;

• Employee privacy and data rights.

The Trump administration believes these laws:

• Create conflicting compliance obligations across states;

• Disadvantage small businesses and multistate employers;

• Slow down adoption of AI in business operations.

This EO represents a strategic push to shift AI regulatory authority from states to the federal level and to pave the way for unified national standards.

Impacts for Employers

From an employer’s perspective, the Executive Order signals long-term regulatory changes rather than any immediate shift in current obligations.

1. Short-Term: No Change in Compliance Obligations

State-level AI employment laws remain in full effect. Until a court rules otherwise or Congress passes new legislation, employers must continue to comply with all current regulations.

2. Employers Are Not Direct Targets—Yet

The EO focuses on challenging state laws, not directly regulating employer behavior. However, companies remain exposed to enforcement from state regulators, employee complaints, and private lawsuits.

3. Compliance Landscape May Become More Unstable

Employers could face:

• Legal challenges to certain state laws;

• Conflicting regulatory requirements at federal vs. state levels;

• A need for region-specific compliance strategies.

4. Fair Hiring & Anti-Discrimination Laws Still Apply

Even if some state laws are rolled back, employers must still comply with federal and state anti-discrimination laws. Using AI tools does not exempt employers from legal accountability in employment decisions.

Employer Action Plan

To navigate this evolving regulatory environment, we recommend a proactive, risk-managed approach:

1. Continue Complying with Existing AI Employment Laws

Don’t assume the EO voids state laws. Premature non-compliance may expose your company to legal risk.

2. Audit Existing AI and Automation Tools in the Workplace

Assess whether you are using AI in any of these contexts:

• Resume screening or automated hiring

• Interview scoring or candidate ranking

• Performance evaluation systems

• Promotion or termination recommendations

• Employee productivity tracking or monitoring

Any tool that influences employment decisions—even indirectly—should be reviewed for compliance.

3. Build a Sustainable AI Governance Framework

Ensure your business has:

• Human oversight for AI-influenced decisions;

• Bias and fairness assessments for major employment decisions;

• Clear documentation on AI data use, retention, and accountability.

  
  

These steps support both current compliance and future adaptability.

4. Evaluate Contracts with AI Vendors

Review whether your AI suppliers provide sufficient flexibility to adapt to changing laws. Avoid rigid systems that could increase compliance costs down the line.

5. Monitor Federal Guidance and Timeline Closely

Federal agencies will likely release follow-up reports and action plans in the coming months. Delay major investments or policy changes until you’ve assessed these developments.

For a Long-Term View on AI Employment Compliance

To better understand the broader trends, see our recent publication: The Rise of AI Legislation in the U.S. - A 2026 Labor Compliance Guide. This guide explores long-term AI policy developments and offers strategic frameworks for compliance. We recommend HR teams and executive leadership read it alongside this update to plan a comprehensive AI employment strategy.

Compliance requirements may evolve quickly, and now is the time to assess internal processes, reduce legal risk, and stay ahead of new federal standards. For tailored guidance, contact the ILS legal team at contact@consultils.com—we help employers navigate AI compliance with clarity and confidence.

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.

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As Partner and Head of Transactions at ILS, Fiona delivers professional legal and strategic support to tech companies—with a focus on AI, medical devices, and fintech. Beyond full-spectrum technology law, she specializes in export control and compliance: supporting tech firms at all growth stages, aiding startups in scaling operations, and helping mature enterprises address regulatory challenges.

Previously, Fiona gained hands-on experience building legal frameworks from scratch. She advised unicorn companies on global expansion and regulatory hurdles, developing deep insight into clients’ growth challenges. Combining legal expertise with commercial judgment, she helps clients establish sustainable legal processes and provides clear guidance to advance their business.

Email:  contact@consultils.com | Phone: 626-344-8949