The Recorder, “California’s Expanding AI Employment Regulations: Beyond the Oct. 1 Deadline, by Dove A.E. Burns, Esq. and Tad Devlin, Esq., 10-7-2025
California’s Expanding AI Employment Regulations: Beyond the Oct. 1 Deadline
This article outlines the key legal and legislative developments shaping California’s approach to AI in employment, the implications for employers, and the strategic considerations legal counsel should prioritize as this regulatory landscape continues to evolve.
October 7, 2025
By: Tad Devlin, Dove A.E. Burns
As California employers prepare for the Oct. 1, 2025, compliance deadline that imposes new restrictions on the use of automated decision systems (ADS) and artificial intelligence (AI) in employment practices, they must also brace for a broader and accelerating regulatory shift.
A growing slate of pending legislation in the California Legislature—from proposed limits on AI in hiring and employee management to new constraints on workplace surveillance—signals a significant transformation in how the state intends to regulate ADS and broader applications of AI in the workplace. Simultaneously, litigation risk is mounting, as illustrated by Mobley v. Workday, a closely watched federal collective action that challenges the use of algorithmic tools in employment decisions.
For legal counsel, the task ahead is clear but complex: not only must they guide clients through the immediate requirements of current law, but they must also help organizations proactively design adaptable, future-ready compliance strategies. Those who act now—by evaluating risk exposure, establishing robust governance frameworks, and aligning internal policies with emerging best practices—will be better positioned to reduce liability and stay compliant in this high-stakes environment.
This article outlines the key legal and legislative developments shaping California’s approach to AI in employment, the implications for employers, and the strategic considerations legal counsel should prioritize as this regulatory landscape continues to evolve.
The Oct. 1 Deadline: A New Baseline for Compliance
Beginning Oct.1, updated regulations from the California Civil Rights Council (CRC) clarify that the California Fair Employment and Housing Act (FEHA) and other discrimination laws apply to the use of ADS, rather than impose new obligations on employers. Because ADS is broadly defined, these rules will cover a wide range of AI tools used in hiring and HR decisions. Employers using any computational process that impacts employment benefits must ensure their systems comply with anti-discrimination laws, signaling a major change to managing algorithmic or data-driven personnel decisions.
The regulations prohibit employers and covered entities from using ADS or selection criteria that discriminate against applicants or employees based on protected characteristics under FEHA, such as race, gender, disability or age.
- Anti-Bias Testing—Affirmative Defense
The most crucial impact of the regulations is the explicit provision that anti-bias testing or similar efforts will be relevant to any claim or defense concerning ADS. Employers who conduct such testing may use it as evidence of proactive efforts against unlawful discrimination. Although no specific methods are required, both pre- and post-ADS adoption testing are pertinent when determining liability.
- Recordkeeping Requirements—Broad and Lengthy Obligations
While FEHA previously required two years of recordkeeping, employers must now keep ADS data for four years. Given the broad definition of ADS, this means retaining a much wider range of HR and hiring information than before, including training, performance evaluations and raw data. Meeting these regulations will likely create compliance and data retention challenges for employers.
- Agent Theory of Liability
The new regulations expand the definition of “agent” to specifically include activities using ADS. The regulatory expansion is consistent with the landmark decision in Mobley wherein U.S. District Judge Rita Lin of the Northern District of California held that AI vendors can be held directly liable for employment discrimination under the “agent theory” of liability. The novel application of the agency theory in this context is expected to lead to a significant expansion of liability for AI vendors and employers alike. The new CCRC regulations are consistent with the Mobley application of agency theory and clarify that AI vendors, third-party facilitators using ADS and employers themselves will face liability and/or joint liability for discrimination.
The Next Wave: Legislative Proposals Expanding the Regulatory Perimeter
Several pending bills in the California Legislature go beyond the amended regulations, suggesting that lawmakers are moving toward a comprehensive governance model for AI in the workplace—one that reaches beyond compliance checklists to fundamentally shape how employers develop and deploy automated systems.
- SB 7—The “No Robo Bosses Act”
SB 7, dubbed the “No Robo Bosses Act,” would place strict limitations on the use of ADS in a wide range of employment functions.
Among key provisions:
- An employer would have to provide written notice that an ADS, for the purpose of making employment-related decisions, not including hiring, is in use at the workplace to all workers that will foreseeably be directly affected by the ADS. Similarly, the bill would require an employer to notify a job applicant that it utilizes an ADS when making hiring decisions.
- Employers would be barred from relying solely on an ADS when making a discipline, termination or deactivation decision. A human reviewer must review the system’s findings and consider other relevant information.
- An employer would have to maintain an updated list of all ADS currently in use.
SB 7 is likely to go into effect soon; the bill recently passed the Legislature and there is a Sept. 30 deadline for Gov. Gavin Newsom to take action.
- AB 1018—The Automated Decisions Safety Act
AB 1018 aims to broadly regulate the development and deployment of an ADS used to make consequential decisions beyond just employment-related decisions but various other contexts including housing, education and healthcare.
Key provisions include:
- Beginning Jan. 1, 2027, deployers of covered ADS must take certain actions including:
- Providing certain disclosures to individuals subject to an ADS-driven decision.
- Offering a process to appeal the outcome of that decision.
- Developers, deployers or auditors must, within 30 days of receiving a request from the Attorney General, provide the AG with an unredacted copy of the performance evaluation or disparate impact assessment. These records are exempt from the California Public Records Act.
- Noncompliance may result in a civil action by the Attorney General or other authorized public entities.
These details are laid out in a July 3, 2025 Senate Judiciary Committee executive summary on “Automated decision systems.”
- AB 1221 and AB 1331—Regulating AI Surveillance
AB 1221 and AB 1331 regulate the use of AI-powered workplace surveillance tools, including:
- Time-tracking tools.
- Electromagnetic tracking tools.
- Biometric tracking devices.
Each bill has different requirements but between them would impose greater restrictions including:
- Requiring written notice to employees before introducing a workplace surveillance tool (AB 1221).
- Dictating where employers may utilize these tools (AB 1331).
- Prohibiting employers from using certain workplace surveillance tools altogether, including emotion recognition technology (AB 1221).
For employers that rely on digital productivity tools or remote workforce monitoring, these bills could pose significant operational and legal hurdles.
Litigation Risk: ‘Mobley v. Workday’
As California lawmakers ramp up AI regulation, the courts are beginning to address employer liability for algorithmic decision-making—particularly under anti-discrimination frameworks.
In Mobley, the plaintiff alleged that Workday’s AI-based applicant recommendation system discriminated against job applicants on the basis of race, age and disability.
Among latest developments, the U.S. District Court for the Northern District of California (Judge Lin), granted a motion for preliminary certification of the collective (May 16, 2025).
This case could establish precedent around disparate impact liability for employers that adopt algorithmic systems without adequate safeguards—even when those tools are licensed from third-party vendors.
Practical Implications for Employers and Counsel
To navigate this evolving environment, legal counsel should alongside human resource professionals and compliance departments should guide employers toward proactive risk management and forward-looking compliance strategies, which may include:
- Auditing Existing AI and ADS Tools: Conducting a comprehensive audit of tools currently in use or under consideration, and documenting their purpose and function; data inputs and outputs; vendor-provided validation and testing materials; and disparate impact analysis, if any.
- Establishing Internal AI Governance Frameworks: Creating cross-functional governance teams—including HR, legal, and IT—to vet new AI deployments and monitor system performance and legal compliance.
- Engaging With Vendors Proactively: Negotiating contracts to require compliance with applicable laws; and requesting access to documentation, impact assessments, and testing results.
- Preparing for Disclosure and Consent Requirements: Ensuring systems are in place to provide timely and accurate employee and applicant notices; consent forms (especially for surveillance tools); and appeal mechanisms or human review channels.
- Staying Informed and Agile: Monitoring changes not just in California but at the federal level and internationally, as global standards increasingly influence U.S. lawmakers.
The AI compliance deadline marks a pivotal moment—but is likely only a starting point in California’s ambitious regulatory trajectory on AI in employment. With sweeping legislative proposals like SB 7, AB 1018, and AB 1221/1331, and landmark litigation such as Mobley, legal counsel must prepare employers for an era of heightened accountability, transparency and oversight.
Author bios: Tad Devlin is managing partner of Kaufman Dolowich’s San Francisco office. He represents clients in employment law, professional liability, and insurance coverage litigation, and also advises clients regarding data privacy and breach matters. Contact him at tdevlin@kaufmandolowich.com.
Dove A.E. Burns is regional managing partner of the firm’s California offices. A labor and employment attorney, Burns defends clients in class actions, complex wage and hour matters, discrimination and harassment claims, trade secrets, crypto/blockchain, sexual misconduct, fiduciary claims, and restrictive covenant disputes. Contact her at dove.burns@kaufmandolowich.com.
