California AI Employment Regulations

California AI Employment Regulations: Ensuring Fairness in Automated Decision-Making

California has introduced new regulations to govern the use of artificial intelligence (AI) in employment decisions, effective October 1, 2025. These regulations, issued by the California Civil Rights Council, aim to prevent discrimination and ensure fairness in hiring and workplace practices. The updated rules amend existing regulations to address the challenges posed by AI, machine learning, and automated decision systems (ADS) in employment.

The regulations apply to employers with at least five employees, including those with at least one employee working in California. They build upon the California Fair Employment and Housing Act (FEHA), which prohibits employment discrimination. The new rules clarify how FEHA applies to emerging technologies like AI, ensuring that employers cannot use ADS in a way that discriminates against job applicants or employees based on protected categories.

ADS in Employment Practices

Employers are prohibited from using ADS in recruitment, hiring, promotion, training, pay, benefits, leave, or termination processes to discriminate based on race, gender, religion, age, disability, or other protected categories. ADS includes any computational process that makes or facilitates human decision-making, such as AI, machine-learning algorithms, statistics, or other data processing techniques.

These systems are used for tasks like computer-based assessments, resume screening, job advertisements, and analyzing employee data. The regulations emphasize that employers cannot avoid liability by relying on ADS vendors. Agents of an employer are also considered employers under these regulations, ensuring accountability at all levels.

AI in Recruiting

The regulations specifically address the use of ADS in recruiting, highlighting the potential for unlawful employment discrimination. Employers are prohibited from using ADS to restrict or exclude candidates based on protected characteristics or to classify or express preference based on protected class membership. Additionally, the rules prohibit the use of ADS to unlawfully inquire into an applicant’s criminal history or to advertise jobs in a discriminatory manner.

AI and Disability

The regulations also address the impact of AI on applicants and employees with disabilities. Systems that measure skills or reaction time may inadvertently discriminate against individuals with disabilities. Employers must consider reasonable accommodations for those who need them. While employers are not required to test ADS, anti-bias testing may be relevant in discrimination claims or defenses.

Data Retention Requirements

Employers are required to preserve all ADS data for four years. This includes data used in or resulting from the application of an ADS, such as data about applicants or employees, as well as data reflecting employment decisions. The regulations aim to ensure transparency and accountability in the use of AI in employment decisions.

Future of AI Regulation

While these regulations are a significant step, they are just the beginning. The California Legislature has previously introduced bills seeking to regulate the development and deployment of ADS, though these bills have not yet passed. As AI becomes more prevalent, future proposals are expected to further refine the regulatory landscape.

Employers are encouraged to understand their AI systems, evaluate their output, and consider the risks of unlawful discrimination. Regular audits and record retention protocols can help reduce claims and strengthen defenses, ensuring compliance with California’s evolving AI employment regulations.