California’s Civil Rights Division has issued new regulations on the use of automated employment decision systems (ADS), including AI and algorithm-based tools, in hiring and workplace decisions. Starting Oct. 1, 2025, employers must ensure these systems do not create bias or risk liability under the Fair Employment and Housing Act (FEHA).
California employers must soon comply with new rules regarding how automated employment decision systems (ADS) — including those powered by artificial intelligence, algorithms or data analytics — can be used in hiring, promotions, pay, benefits and other workplace decisions.
The new regulations from California’s Civil Rights Division (CRD) make it unlawful for employers to use ADS in a manner that discriminates against applicants or employees based on protected characteristics under the Fair Employment and Housing Act (FEHA).
Employers must comply with the new regulations beginning Oct. 1, 2025.
What ADS Activities are Covered?
An ADS is defined as a computational process that makes, or assists in making, decisions regarding employment benefits such as hiring, promotion, selection for training programs or similar activities. An ADS can result from artificial intelligence, machine learning, algorithms, statistics or other data processing techniques. The definition of ADS does not include word processing software, spreadsheet software or other commonly used software for day-to-day work.
The expansive new regulations apply to employers and “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, which 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 automated decision system.”
How to Prepare for the New ADS Regulations
To comply with the new regulations, employers should:
- Review and Update ADS Systems: Conduct a thorough review of existing processes and systems used for hiring, performance and productivity evaluation to determine whether ADS is incorporated into these processes and, if so, identify potential biases. This should include inquiring with vendors, recruiters and professional employer organizations (PEOs) about their anti-bias testing protocols and data-use practices and confirm their understanding of ADS-related liability. Update systems, policies and procedures to align with the CRD’s new regulatory requirements.
- Implement Anti-Bias Testing: Perform anti-bias testing on ADS before the Oct. 1, 2025, effective date and schedule regular testing after to ensure compliance. Document the results and any corrective actions taken.
- Training and Awareness: Provide training on the implications of using ADS and the importance of maintaining non-discriminatory practices to HR personnel, decisionmakers and employees involved in screening applicants, interviewing, hiring and evaluating performance. Keep in mind that using ADS for certain skill testing may necessitate providing reasonable accommodations for religious beliefs or disabilities, ensuring non-discriminatory practices.
- Recordkeeping: Maintain detailed records of all personnel actions and decisions made using ADS, as required by the updated regulations. This includes preserving ADS-related records, like dataset descriptors, scoring outputs and audit findings, for four years.
By taking these steps now, employers can not only comply with the new ADS regulations but also foster a more inclusive and equitable workplace.
For further guidance or questions, please contact the author of this article, Shareholder Anne Wilson, or one of Duckor, Metzger & Wynne, APLC’s, experienced and trusted Employment & Labor Law attorneys.