New California Artificial Intelligence regulations (AI Regulations) adopted by the Civil Rights Council (Council) will be effective October 1, 2025. These regulations, which you can find here, are intended to protect candidates and employees against potential employment discrimination as a result of the use of AI, algorithms and other automated-decision systems. In adopting these regulations, the Council amended protections already afforded to candidates and employees under the California Fair Employment and Housing Act (FEHA) to define terms (discussed below) such as “automated-decision system,” “agent,” “employment agency,” “algorithm,” “artificial intelligence” and “machine learning.”
By way of background, the FEHA applies to employers with five or more employees. Employees located inside and outside of California are counted in determining whether employers are covered under the FEHA. If an employer engages in an unlawful employment practice that violates the FEHA, including a violation of the new AI Regulations as of October 1, 2025, then the complainant(s) or class of complainants are entitled to individual or personal relief, including, but not limited to, hiring, reinstatement or upgrading, back pay, or other relief in furtherance of the FEHA.
Key Definitions
An automated-decision system (ADS) is defined as a “computational process that makes a decision or facilitates human decision making regarding an employment benefit.” The ADS may be derived from and/or use artificial intelligence, machine learning, algorithms, statistics and/or other data processing techniques. For example, an ADS may perform tasks such as using computer-based assessment or tests to: (i) make predictive assessments about an applicant or employee; (ii) measure an applicant’s or employee’s skills, dexterity, reaction-time, and/or other abilities or characteristics; (iii) measure an applicant’s or employee’s personality trait, aptitude, attitude, and/or cultural fit; and/or (iv) screen, evaluate, categorize, and/or recommend applicants or employees. By way of another example, the ADS may perform tasks such as directing job advertisements or other recruiting materials to targeted groups or screening resumes for particular terms or patterns.
Importantly for employers, ADS excludes certain electronic software, such as word processing software, spreadsheet software and data storage, amongst others, provided that these technologies do not make a decision regarding an employment benefit (such as hiring, terms of employment or promotion).
An Agent includes any person acting on behalf of an employer, directly or indirectly, to exercise a function traditionally exercised by the employer or any other FEHA-regulated activity. Such function may include applicant recruitment, applicant screening, hiring, promotion or decisions regarding pay, benefits or leave, including when such activities and decisions are conducted in whole or in part through the use of an ADS. The regulations also provide that an agent of an employer is also an “employer” for purposes of the Act.
An Employment Agency includes any person undertaking for compensation, the procurement of job applicants, employees or opportunities to work, including persons undertaking these services through the use of an ADS.
An Algorithm is defined as a set of rules or instructions a computer follows to perform calculations or other problem-solving operations.
Artificial Intelligence is defined as a machine-based system that infers, from the input it receives, how to generate outputs, which may include predictions, content, recommendations or decisions.
Automated-Decision System Data is defined as: (1) Any data used in or resulting from the application of an ADS, such as data provided by or about individual applicants or employees, or data reflecting employment decisions or outcomes; and/or (2) Any data used to develop or customize an automated-decision system for use by a particular employer or other covered entity.
Machine Learning is defined as the ability for a computer to use and learn from its own analysis of data or experience and apply this learning automatically in future calculations or tasks.
Examples of Prohibited Discrimination Related to the Use of AI
The regulations provide that it is unlawful for an employer to use an ADS or selection criteria that discriminates against an applicant or employee on a basis protected by the FEHA.
- The use of an ADS that analyzes an applicant’s tone of voice, facial expressions, or other physical characteristics or behavior may discriminate against individuals based on race, national origin, gender, disability or other characteristics protected under the FEHA.
- The use of an ADS that measures an applicant’s skill, dexterity, reaction time, and/or other abilities or characteristics may discriminate against individuals with certain disabilities or other characteristics protected under the FEHA.
Employer Defense
An employer may assert an affirmative defense against discrimination claims by providing evidence, or lack of evidence, of anti-bias testing or similar proactive effort, including the quality, efficacy, recency and scope of such effort, the results of such testing or other effort, and the response to the results.
Recordkeeping
The regulations require that employers maintain records for four years from the date of the making of the record or the date of the personnel action involved, whichever occurs later. The regulations clarify that the records include all applications, personnel records, membership records, employment referral records, selection criteria, automated-decision system data, and other records created or received by the employer.
Conclusion
The AI Regulations are yet another set of rules with which California employers must comply. It is anticipated that the California Civil Rights Department will issue FAQs and/or a Fact Sheet in regard to these regulations. Employers should review their practices and procedures to ensure compliance by October 1, 2025.
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