California is leading the way in regulating how artificial intelligence (AI) and automated decision-making systems (ADS) are used in the workplace. In March 2025, the California Civil Rights Council approved new rules—set to take effect on July 1, 2025—that clarify employers can be held liable if ADS tools cause discrimination based on protected characteristics like race, gender, disability, or age.
What Employers Must Do:
- Treat AI tools like any other employment process: If an ADS system results in adverse impact, it may violate the Fair Employment and Housing Act (FEHA).
- Keep records for at least four years: Employers must retain applications, evaluation results, and documentation on how ADS were used.
- Maintain individualized assessments: Especially when considering criminal history—automated filters cannot replace a fair, person-specific evaluation.
- Limit medical and psychological data collection: Employers may only request this if it’s job-related and meets the “business necessity” standard.
What Employers Must Avoid:
- Delegating responsibility to vendors: Employers are still legally accountable, even if a third-party AI tool causes the issue.
- Skipping bias audits: Failing to test your AI systems for disparate impact could become a key liability point.
- Fully automating hiring decisions: These tools should support—not replace—human judgment, especially when it comes to nuanced employment decisions.
Bottom Line:
California employers using or planning to use AI in hiring, promotion, or performance decisions must take these new regulations seriously. Conduct regular audits, retain clear documentation, and don’t rely on vendors to shield you from liability. The legal standard now makes it clear: automation is not a loophole to fairness.
Discover the CLS Advantage
California Labor Solutions (CLS) stands out as one of the few HR firms licensed* to conduct workplace investigations in California. We proudly serve both private businesses and public-sector organizations across the state. With a proven track record, we have conducted hundreds of neutral, impartial, objective, and unbiased workplace investigations. Our expertise covers identifying organizational issues and risks, as well as addressing employee complaints related to discrimination, harassment, retaliation, workplace violence, and various types of employee misconduct. We deliver our services with the utmost quality, detail, and efficiency.
For more information visit www.californialaborsolutions.com or (800) 949-2049 Call Us today!
*California Private Investigator License Number 26311.
Disclaimer
Please note that the updates, advisories, and regulations we receive from the promulgating agency often contain ambiguities and/or are often amended, modified, or updated. This material/article/email does not contain any legal advice. The information and opinions expressed herein are based on our reasonable interpretation of the issuing agency’s publication at the time the opinion is expressed and is, therefore, subject to change based on further developments. The effect of the opinions expressed may be different based on your particular circumstances, and it is recommended that you not rely upon these general opinions prior to obtaining a consultation with your legal and/or financial advisors.