With artificial intelligence developing at breakneck speed, California employment regulations are following right behind. Updated regulations issued by the California Civil Rights Council address the use of artificial intelligence, machine learning, algorithms, statistics and other automated-decision systems (ADS) used to make employment-based decisions. The updated rules, which took effect October 1, 2025, amend existing regulations, Cal. Code Regs., tit. 2, and are designed to protect against potential employment discrimination. The regulations apply to all employers with at least five employees working anywhere and at least one located within California.
No Discrimination Through Automated-Decision Making
California's long-standing Fair Employment and Housing Act (FEHA) prohibits discrimination in employment. The new rules clarify the application of FEHA in the context of new and emerging technologies like artificial intelligence. The regulations prohibit employers from using ADS in a manner that discriminates against job applicants or employees based on any protected category covered by FEHA. Employers cannot use ADS in recruitment, hiring, promotion, training, pay, benefits, leave or termination processes in a way that discriminates based on race (including natural hair and hairstyles such as afros, braids, twists and locs), gender (including pregnancy, childbirth, breastfeeding or related medical conditions), religion (including religious dress and grooming practices), age, disability or other protected categories defined by FEHA.
Automated-Decision Making Defined Broadly
The new regulations define ADS broadly. In the context of these regulations, ADS is a computational process that makes a decision or facilitates human decision-making. It includes systems derived from or that use artificial intelligence, machine-learning algorithms, statistics or other data processing techniques.
The regulations describe ADS as those that perform tasks, such as using computer-based assessments or tests, including questions, puzzles, games or other challenges to make predictive assessments, measure skills, dexterity, reaction time, abilities or characteristics, measure personality traits, aptitude, cultural fit or screen, evaluate, categorize or make recommendations. ADS may also be found in directing job advertisements or recruiting materials to targeted groups, screening resumes for particular terms or patterns, analyzing facial expression, word choice or vocal characteristics in online interviews, or analyzing employee or applicant data.
Third-Party Liability
The regulations make it difficult for employers to point to ADS vendors in an attempt to bypass liability. Agents of an employer, defined broadly by the regulations to include those used for applicant recruitment, applicant screening, hiring, promotion or decisions regarding pay, benefits or leave, are also employers under the updated regulations.
Caution in Hiring
The new regulations address ADS in the recruiting process, acknowledging that it is used by some employers to recruit, make pre-employment inquiries, screen resumes, consider job applications, measure abilities, analyze facial expressions or voices during interviews and otherwise screen applicants. The rules caution that use of ADS for those purposes could result in unlawful employment discrimination. The use of ADS for recruiting that restricts or excludes candidates based on race, gender, religion, age, disability or other protected classes is prohibited. Similarly, ADS that classifies or expresses a preference for a candidate based on their membership in a protected class is prohibited.
The regulations also address employers seeking job applicants and screening out those with criminal backgrounds. Using ADS to advertise for job applicants in a manner intended to discriminate or to unlawfully inquire into an applicant's criminal history is prohibited.
Potentially Discriminatory Methods
The regulations call attention to specific uses of ADS in employment that may poses problems. Without condemning the use of AI, the regulations note that systems that analyze an applicant's or employee's tone of voice, facial expressions or other physical characteristics or behavior, or that consider accents, height, weight, English proficiency, driver's license, citizenship or immigration status, may prove to be discriminatory.
Reasonable Accommodations Required with AI Use
The regulations also address the impact of artificial intelligence on job applicants and employees with disabilities. The regulations point out that ADS that measures an applicant's or employee's skills, dexterity, reaction time or other abilities may discriminate against individuals with disabilities. Employers using ADS must consider reasonable accommodations to applicants or employees who may need them.
Evaluating AI Systems for Bias
The regulations do not require employers to test the ADS they use but expressly state that anti-bias testing or similar proactive efforts to avoid unlawful discrimination may be relevant to discrimination claims or defenses. The regulations suggest six factors to consider when testing ADS for unlawful bias:
- The quality of the testing efforts;
- The efficacy of the tests;
- The recency of the testing;
- The scope of the tests;
- What the test results reveal about ADS outcomes; and
- Whether and how the employer responded to the results and their implications.
Data Retention Requirements
The new regulations require employers to preserve all ADS data for four years. The regulations define ADS data as (1) any data used in or resulting from the application of an ADS, such as data provided by or about individual applicants or employees, or data reflecting employment decisions or outcomes and (2) any data used to develop or customize an ADS for use by a particular employer.
Expect California to Continue to Regulate the Use of AI in Employment
The updated regulations on the use of ADS in employment are only the beginning. The California Legislature previously introduced legislation seeking to regulate the development and deployment of ADS used to make employment-related decisions: AB 1018 in 2025 and AB 2930 in 2024. These proposals were designed to require employers to provide employees and applicants with disclosures about AI-driven decisions with an opportunity to appeal. Both laws, if passed, would have also required employers in some situations to conduct annual impact assessments of the covered ADS. While those bills were defeated, employers should expect future proposals. As the use of AI becomes increasingly prevalent across all facets of life, California will undoubtedly continue its effort to regulate the use of AI.
What This Means for Employers
In a quest for efficiency and cost savings, employers are increasingly using artificial intelligence to screen resumes, interview applicants, gather information and make decisions about their workforce. Through that process, employers may be participating in unlawful employment discrimination. California's latest regulations remind employers of the importance of fully understanding the AI systems they use and taking appropriate steps to prevent discriminatory outcomes. Employers that use ADS technology should know how their systems operate while understanding input, evaluating output and considering unlawful discrimination risk. Regularly perform system audits. Develop record retention protocols. These simple steps may decrease the risk of claims or strengthen defenses for employers who use AI technology to make employment-based decisions.
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If you have any questions about this Alert, please contact Lorraine Ocheltree, Rocio Hernandez, any of the attorneys in our Employment, Labor, Benefits and Immigration Practice Group or the attorney in the firm with whom you are regularly in contact.
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