California to Regulate Use of AI in Employment Starting October 1, 2025

ByContent Manager
automated-decision systems

Overview

Beginning October 1, 2025, California will enforce groundbreaking regulations on employers’ use of Automated Decision Systems (ADS) in hiring, promotions, performance management, and other employment-related decisions.

These new rules—approved by the Office of Administrative Law on June 27, 2025—are designed to prevent discriminatory outcomes from AI and algorithm-based tools. They also extend liability to employers for biased outcomes produced by third-party vendors.

The regulations fall under the Fair Employment and Housing Act (FEHA) and introduce clear anti-discrimination requirements, stronger accommodation obligations, detailed recordkeeping standards, and strict vendor compliance expectations.

What is an Automated Decision System (ADS)?

Under the new regulations, ADS is defined as:

“A computational process that makes a decision or facilitates human decision-making regarding an employment benefit. An Automated Decision System may be derived from and/or use artificial intelligence, machine learning, algorithms, statistics, and/or other data processing techniques.”

Key Provisions of the New Law

1. Effective Date & Scope

  • Effective Date: October 1, 2025
  • Applies to all California employers using ADS in employment decisions, including:
    • Recruitment and hiring
    • Promotions and internal transfers
    • Performance evaluations
    • Benefits eligibility and enrollment

2. Prohibited Practices

Employers may not use ADS if the system:

  • Produces discriminatory outcomes against applicants or employees, unless justified by business necessity.
  • Screens out applicants based on availability in a way that impacts protected groups (e.g., religious observance, disability status, caregiving responsibilities).
  • Assesses traits such as reaction time, physical dexterity, facial expressions, or tone of voice in ways that disadvantage individuals with disabilities or other protected characteristics.

3. Accommodation Requirements

  • Employers must provide reasonable accommodations or alternative assessments where ADS could disadvantage certain individuals.

4. Recordkeeping Obligations

  • Retain ADS-related records—including selection criteria, system data, and personnel records—for at least four years from creation or the related personnel action.

5. Vendor Liability

  • Employers are legally responsible for discriminatory outcomes caused by third-party ADS vendors.
  • Vendor contracts should include:
    • Indemnity clauses
    • Transparency obligations
    • Compliance assurances

Action Steps for Employers

  • Policy Audit: Review and update hiring, evaluation, and technology policies to comply with the new regulations.
  • Vendor Review: Evaluate all AI and ADS tools in use; ensure vendors have effective anti-bias testing protocols.
  • Training: Educate HR teams and decision-makers on AI-related risks, compliance requirements, and bias mitigation.
  • Human Oversight: Maintain human review for all employment decisions made using ADS.
  • Accommodation Processes: Ensure clear procedures for applicants and employees to request reasonable accommodations.

Final Takeaway:

California’s new ADS regulations represent a major shift in how AI can be used in the workplace. Employers should act now to update policies, audit technology tools, and ensure vendor contracts are compliant—before the October 1, 2025 deadline.

Source: California Civil Rights Council – Official Announcement