Question: I heard California adopted new rules for artificial intelligence in employment. Is this true and what impact might it have on employers?
Answer: Yes, there are new rules that regulate a California employer’s use of artificial intelligence. The California Civil Rights Department recently approved a final version of these regulations, and they are effective October 1. The new rules are not a ban on artificial intelligence. Instead, the regulations require employers to ensure that their use of artificial intelligence tools comply with state anti-discrimination laws.
These new regulations cover any “automated decision system” (ADS) that makes or assists in making employment decisions, such as hiring, promotions, selection for training programs, or similar activities. The regulations apply beyond “machine learning” artificial intelligence and cover systems that involve the use of “selection criteria.” These broad definitions mean that common tools such as resume screeners, video interview scoring, chatbots, and scheduling filters cannot result in discrimination based on protected characteristics.
Employers must also ensure that the use of an ADS does not interfere with the employer’s obligation to provide a reasonable accommodation. For example, if an employer uses an ADS tool for a certain skill test during the application process, the employer should implement a measures to allow an applicant to request a reasonable accommodation. If an automated tool causes unlawful screening or adverse impact to job candidates or employees, the employer can be held liable. In some cases, vendors that develop and distribute ADS can also share liability.
Although the new regulations are complex, employers should start by focusing on three main areas: notice/disclosure, auditing, and mitigation.
- Notice and Disclosure: Employers should tell employees, job applicants, and other affected individuals when automated tools are being used. The notice should explain what the tool does, what data it uses, and whether a person will be involved in reviewing the outcome. While this is technically not required by the regulations, it is a best practice.
- Proactive Bias Auditing: Employers must test these systems for potential discriminatory impact on protected groups under California law, including age, race, and disability. The rules require that the criteria used must relate to the job and meet business needs, and that less discriminatory methods be adopted if available.
- Mitigation and Oversight: Employers must address audit results. If a tool shows bias, it must be adjusted or removed. Employers should require vendors to provide documentation of bias testing and legal compliance and include those terms in contracts.
The regulations also require employers to collect and retain certain information related to their use of ADS in employment. Employers must preserve ADS-related records, including dataset descriptors, scoring outputs, and audit findings, for four years. It is crucial that employers comply with these requirements—if someone alleged an employer violated the regulations, these records could be key evidence to support an employer’s compliance.
Employers who wish to comply with these new regulations should consider taking the following steps now:
- Review current use of automated hiring or management systems.
- Create internal procedures for audits and document retention for at least four years.
- Provide notices to applicants and employees.
- Require vendors to certify compliance.
- Train staff on reviewing system outputs and on new regulations.
Businesses are encouraged to stay up-to-date on the changing legal landscape. Employers with questions about these new regulations should contact their labor counsel.