California AI Employment Regulations
Source: duanemorris.com
California Employers and AI: New Regulations
California employment regulations are quickly catching up with the rapid development of artificial intelligence. The California Civil Rights Council has issued updated regulations addressing the use of artificial intelligence, machine learning, algorithms, statistics, and other automated-decision systems (ADS) in employment decisions.
These updated rules, effective October 1, 2025, amend existing regulations (Cal. Code Regs., tit. 2) to protect against potential employment discrimination. The regulations apply to employers with at least five employees, with at least one employee working in California.
California’s Fair Employment and Housing Act (FEHA) already prohibits employment discrimination, and the new rules clarify how FEHA applies to new technologies like AI. The regulations prevent employers from using ADS in a way that discriminates against job applicants or employees based on any protected category under FEHA.
ADS and Employment Practices
Employers are prohibited from using ADS in recruitment, hiring, promotion, training, pay, benefits, leave, or termination processes to discriminate based on race (including natural hair and hairstyles), gender (including pregnancy, childbirth, or related conditions), religion (including religious dress), age, disability, or other protected categories.
ADS is defined broadly as any computational process that makes or facilitates human decision-making. This includes systems using artificial intelligence, machine-learning algorithms, statistics, or other data processing techniques. ADS performs tasks like computer-based assessments or tests to measure skills, personality traits, or cultural fit. It also includes directing job advertisements, screening resumes, analyzing facial expressions or vocal characteristics, or analyzing employee/applicant data.
The regulations stipulate that employers can't avoid liability by pointing to ADS vendors. Agents of an employer are also considered employers under these regulations.
ADS in Recruiting
The regulations address ADS in recruiting, acknowledging its use for pre-employment inquiries, resume screening, and applicant evaluation. The rules caution that using ADS this way could lead to unlawful employment discrimination. ADS use in recruiting that restricts or excludes candidates based on protected characteristics is prohibited, as is ADS that classifies or expresses preference based on protected class membership.
The regulations also address screening applicants with criminal backgrounds. Using ADS to advertise jobs in a discriminatory manner or to unlawfully inquire into an applicant’s criminal history is prohibited.
Specific Concerns with AI
The regulations highlight specific AI uses that may cause problems. While not condemning AI, the regulations note that systems analyzing tone of voice, facial expressions, or considering accents, height, weight, English proficiency, driver’s licenses, or immigration status may be discriminatory.
The regulations also address AI's impact on applicants and employees with disabilities, noting that ADS measuring skills or reaction time may discriminate. Employers must consider reasonable accommodations for those who need them.
While employers aren't required to test ADS, anti-bias testing may be relevant in discrimination claims or defenses.
Data Retention
Employers must preserve all ADS data for four years. ADS data includes any data used in or resulting from the application of an ADS, like data about applicants/employees or data reflecting employment decisions, as well as data used to develop or customize an ADS.
The regulations are just the start. The California Legislature previously introduced AB 1018 in 2025 and AB 2930 in 2024, seeking to regulate the development and deployment of ADS, which would have required employers to disclose AI-driven decisions and allow appeals, and conduct impact assessments. Although those bills failed, future proposals are expected as AI becomes more prevalent.
In pursuit of efficiency, employers are increasingly using AI to screen resumes, interview applicants, and make workforce decisions. California’s regulations remind employers to understand their AI systems and prevent discriminatory outcomes. Employers using ADS technology should know how their systems operate, evaluate output, and consider unlawful discrimination risks. Regularly performing system audits and developing record retention protocols may reduce claims or strengthen defenses.