California continues to lead the way in regulating emerging technologies in the workplace. As of October 1, 2025, new regulations issued by the California Civil Rights Council went into effect, clarifying how existing anti-discrimination laws apply to artificial intelligence (AI) and automated decision systems (ADS) used in employment practices.
These regulations are a direct response to growing concerns about bias and discrimination embedded in AI tools used for hiring, promotions, and employee evaluations. Non-compliance could expose employers to legal liability and reputational damage, making it critical for businesses to prepare now.
Key Highlights of the New Regulations
Expanded Definitions: ADS now includes any computational process that assists or makes employment decisions – such as resume screening, skill assessments, behavioral analysis, or cultural-fit analysis, targeted job ads, and online video/audio evaluations.
Anti-Discrimination Enforcement: Employers may be held liable if their use of ADS results in adverse impacts on protected groups under the Fair Employment and Housing Act (FEHA), which applies to employers with five or more employees. Protected categories include race, gender, religion, disability, and other characteristics.
Accommodation Requirements: Employers must provide reasonable accommodations when ADS evaluations could disadvantage individuals due to disability or religious belief, such as tests that screen out qualified candidates or scheduling conflicts with religious observances.
Recordkeeping Obligations: Employers must retain ADS-related data, including inputs, outputs, scoring criteria, and bias audit results, for a minimum of four years.
Why This Matters
While AI can streamline recruitment and performance evaluations, it can also replicate historical biases. For example, an algorithm trained on a male-dominated workforce may unintentionally exclude qualified female candidates.
These new regulations aim to prevent such outcomes, ensure fairness in employment decisions, and protect employees and applicants. Employers that fail to comply risk litigation, enforcement action by the California Civil Rights Department (CRD), and significant reputational damage.
Compliance Checklist for Employers
To comply with the new regulations, California Labor Solutions recommends:
- Conducting bias audits on all AI tools used in hiring, promotions, or evaluations.
- Requesting transparency from vendors regarding data practices, anti-bias testing protocols, and liability.
- Reviewing vendor contracts to ensure obligations around data use, audit rights, and compliance are clear.
- Implementing pre- and post-deployment bias testing with legal guidance.
- Updating data retention policies to meet the four-year requirement.
- Ensuring human oversight in AI-driven decisions.
- Training HR and leadership teams on ADS compliance, FEHA responsibilities, and accommodation obligations.
- Updating company policies to reflect reasonable accommodation tied to ADS use.
Why Choose California Labor Solutions?
California Labor Solutions (CLS) stands out as one of the few HR and investigations firms licensed* to conduct workplace investigations in California. We specialize in helping companies confidently navigate complex HR and employment challenges.
We bring over 20 years of experience in HR compliance and workplace investigations, ensuring every case is handled with neutrality and in accordance with California law. If you receive a discrimination complaint, our process helps protect employers from costly risks, provides employees with a safe and respectful way to share their concerns, and delivers clear findings backed by evidence. By choosing us, leaders can feel confident that sensitive issues are being managed with professionalism, integrity, and a focus on building trust in the workplace.
*California Private Investigator License Number 26311.
Disclaimer
This article is for informational purposes only and does not constitute legal advice. Regulatory guidance may change, and its impact can vary depending on individual circumstances. Readers should consult qualified legal or financial professionals before acting on the information provided.