California to Regulate Employer Use of AI: What Employees Need to Know

The Golden State is known for making significant moves in protecting employee rights, and it is doing it again. California is set to implement new rules that limit how employers can use Artificial Intelligence (AI) and other automated decision-making systems in employment decisions. In March 2025, the California Civil Rights Council approved the final and modified text of California’s New “Employment Regulations Regarding Automated-Decision Systems.” These new regulations, which are set to take effect later this year, could significantly impact how employees and job applicants are evaluated in the workplace. The new rules aim to protect employees and job applicants from discrimination caused by these technologies. Once they take effect, California will become one of the first states to adopt comprehensive laws regarding the use of AI and other automated decision-making systems.

Below are some key aspects of the new regulations.

What are Automated Decision-Making Systems?

According to the final regulations, an automated decision-making system is a tool that makes decisions or helps employers make decisions regarding employment benefits. These systems are often derived from and/or use machine learning, artificial intelligence, statistics, algorithms, and data analysis techniques. The regulations apply to different types of systems, but standard tools such as word processors, navigation apps, and spreadsheets are not covered as long as they don’t make decisions regarding employment benefits.

Protecting Against Unlawful Selection Criteria

Hiring tools that treat people unfairly have long been illegal in California, but the new regulations clarify that this also includes unfair treatment caused by AI or automated systems. Specifically, the rules state that it is unlawful for employers to use any automated decision-making system or selection method, such as tests, that results in discrimination against an individual based on things like gender, race, disability, age, or other traits protected by FEHA.

Protecting Against Discriminatory Pre-Employment Practices

The new regulations explain that the use of online application technology that ranks, screens out, or prioritizes applicants based on their availability can lead to discrimination against applicants based on their religion, disability, or medical condition unless it’s work-related and required by the business, and there is an opportunity for applicants to request accommodations. For example, if a system filters you out because you can’t work certain hours due to your religion, that could be illegal unless those hours are truly required for the job, and you can ask for accommodation.

Criminal Background Checks

The new regulations also apply to how California employers use technology in criminal background checks. California law already requires employers to make individualized assessments of whether an applicant’s criminal history has a direct and negative relationship with their job duties before denying the application. Using automated tools that automatically screen out applicants with a criminal record without individualized assessments could be unlawful.

Illegal Medical or Psychological Inquiries

A critical provision of the new regulations is the prohibition against using AI or other automated decision-making systems to gather information about an individual’s medical or psychological condition, including through games or puzzles during interviews that might indirectly reveal a disability.

As these new regulations roll out, it is vital for employees to understand their rights. A qualified attorney can help you understand your rights.  

Contact a California Employment Lawyer

If you have questions about the new regulations discussed in this article or need help with a related matter, contact a California employment lawyer for personalized guidance.