October 18, 2025
AI and other automation tools are quickly changing the workplace. Employers are increasingly turning to these technologies to manage key stages of the employment relationship, from hiring employees to coaching, performance evaluations and promotion decisions. In recognition of employers’ prolific and increasing use of AI, the California Civil Rights Department (CRD) recently implemented regulations prohibiting using Automated Decision Systems (ADS) (including AI) in a discriminatory manner.
The essentials of the new regulations
Effective October 1, 2025, all employers covered by the Fair Employment and Housing Act (those with 5 or more employees) must comply with the new regulations, which apply not only to AI, but to all ADS. ADS are defined as any “computational process that makes a decision or facilitates human decision making regarding an employment benefit.” ADS include processes derived from or using “artificial intelligence, machine-learning, algorithms, statistics, and/or other data processing techniques.” Put simply, an ADS is any technology that makes or assists in making employment decisions.
Examples of ADS include:
- Software screening resumes for specific keywords or patterns;
- Job advertisement platforms targeting certain groups;
- Online assessments that utilize puzzles, games, or tests to evaluate skills;
- Automated ranking or scoring of employees or applicants;
- Video interview analysis tools; and
- Targeted job advertisements.
What are the essential obligations on employers?
The regulations have three primary impacts on employers:
- Employers are prohibited from using ADS in a manner that discriminates on the basis of protected categories. The regulations expressly provide that preventing discrimination includes the obligation to offer reasonable accommodation for disability or religious needs to applicants or employees in connection with the use of ADS.
- Although not required, the regulations emphasize the value of bias audits or other proactive efforts to avoid (and defend against claims of) unlawful discrimination that may arise through the use of ADS. The adequacy of these audits will depend on their quality, efficacy, recency, and scope, as well as the results and the employer’s response to the results.
- Employers must preserve all ADS-related records, including dataset descriptors, scoring outputs, and audit findings, for at least four years.
Your next steps in response to these regulations
To ensure compliance with the regulations and minimize exposure, we recommend the following steps:
- Establish an audit system that includes regular review of any ADS tools used in employee screening, hiring, promotion selection, coaching and/or evaluation. This means testing the outcomes to ensure there isn’t a disparate impact on any protected class. It includes bias testing before and after deployment.
- Remember, you may not be off the hook just because the ADS isn’t yours, but is instead provided by a third party. Before you agree to an ADS ask the vendor for their anti-bias testing protocols and about the steps that were taken to avoid discriminatory outcomes. Ask them what their ongoing audit process looks like.
- Utilizing an ADS does not absolve you of human attention to the process. Ensure there is human oversight of ADS-facilitated decisions and processes.
- Notify employees and applicants of your use of ADS tools, and be sure to provide accommodations or human alternatives when you are on notice that an applicant or employee needs assistance due to a disability.
- Update your record-keeping systems to ensure that ADS-related data is retained for at least four years.
This landscape is changing fast. If you have questions about a particular ADS you are using, or the law in general, we are happy to help.
