California Adopts Employment AI Regulations Effective October 1, 2025

The California Civil Rights Council has finalized regulations under Title 2 of the California Code of Regulations aimed at protecting  against potential employment  discrimination resulting from the use of artificial intelligence (AI), algorithms, and automated decision systems (ADSs) (the “Regulations”). These Regulations amend the California’s Fair Employment and Housing Act (FEHA) and states that employers with five or more employees in California may be held liable if their use of ADS, including AI violates California law by discriminating against employees or applicants, either directly or through disparate impact, based on protected characteristics such as race, age, religious creed, national origin, gender, or disability. Notable provision includes:

Definition of ADS. A computational process that makes a decision or facilitates human decision-making regarding employment benefits. An ADS includes that may be derived from and/or use of AI, machine-learning, algorithms, statistics, and/or other data processing techniques – that makes or help make decisions regarding employees or job applicants. ADS performed tasks include:

• Using computer-based assessments or tests (e.g. questions, puzzles, games) to assess an applicant’s or employee’s abilities, traits, or suitability - such as skills, reaction time, personality, or cultural fit and to screen, evaluate, or recommend candidates;
• Targeted job advertising;
• Resume screening for specific terms or patterns;
• Analyzing facial expressions, voice, or word choice in interviews;
• Using third-party data to assess applicants or employees.

Basic IT tools such as emails, firewalls, word processing software, map navigation or spreadsheet are excluded.

Anti-Bias testing as affirmative defense. The Regulations provide that, to defend against discrimination claims involving ADS use, employers can demonstrate that they conducted “anti-bias testing or similar proactive efforts to avoid unlawful discrimination” prior to and after adopting an ADS. The Regulations outline six relevant aspects for evaluating anti bias testing, including the quality, efficacy, recency, and scope of such testing or other effort and the employer’s response to the results.

Recordkeeping. The Regulations requires employers and covered entities to preserve personnel and other employment records for a minimum four years from the date of the making of the record or the date of personnel action involved, whichever occurs later. Records subject to this requirement 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 or other covered entity dealing with any employment practice and affecting any employment benefit of any applicant or employee.”

Third Party Liability for “Agents”. The Regulations extend liability for ADS-driven discrimination to agents acting on behalf of an employer, directly or indirectly by performing activities such as applicant recruitment, screening and hiring, promotion, or decisions regarding pay, benefits, or leave. These agents are considered “employers” under FEHA and may be held accountable for discriminatory outcomes resulting from their use of ADS tools.

For more information or advice concerning California’s employment AI regulations, please contact Brianna Soares.