Technological advancements in the form of artificial intelligence (AI) and automated decision-making tools are quickly changing the workforce. However, starting October 1, 2025, California employers will have an added layer of legal responsibility: the Civil Rights Department regulations in the state regarding the use of Automated Decision Systems (ADS).

The regulations will cover all employees in California, regardless of the size of the business or the industry. More significantly, the regulations will impose obligations on all businesses using any form of technology, including traditional AI as well as simple selection criteria, in their terminating or considering hiring, promotions, or evaluation of employees. For many businesses, these obligations will represent a new compliance approach, changes to recordkeeping, and a review of third-party vendors.

As an experienced employment law attorney, Strategy Law is here to assist you in understanding what the new regulations may mean for you, and your employees, and how to prepare your business in response.

What Is an Automated Decision System (ADS)?

The new regulations interpret ‘ADS’ in a broad sense, meaning that they cover any computational process used to make employment decisions or assist with those decisions. Thus, the rules not only cover cutting-edge AI, but even simple digital systems that use a selection criterion in the decision process. 

Some examples of ADS include: 

• Resume-screening software that identifies keywords or patterns
• Job advertisement platforms that target certain groups
• Online assessments that evaluate skills through puzzles, games or tests 
• Video or audio analyses that evaluate candidates’ responses.

Key Protections Under the New Regulations

Employers may not use ADS in a manner that discriminates against applicants or employees based on the categories protected by the Fair Employment and Housing Act (FEHA), including race, gender, age, disability, and religion, or any other protected characteristic.

Employers must also:

• Provide reasonable accommodations for disability and religious needs when using ADS
• Prevent bias by looking at how ADS tools work and if their outcomes have a discriminatory effect.

Bias Audits and Employer Liability

The regulations highlight the significance of bias audits to reduce risk. Courts and agencies may consider the following: 

• The caliber, scope, and frequency of audits;  
• Whether employers acted appropriately on the audit findings; and  
• The lack of testing may be a negative factor for the employer.  

Accordingly, organizations using ADS will want to have a documented, proactive review of their compliance practices.

Recordkeeping Requirements

It is now a requirement that employers keep ADS-related documents for four years, including:

• Descriptions of datasets
• Scores generated by the outputs
• Audit results 

These documents will be very important if an employer is investigated or confronted with discrimination complaints.

Compliance Checklist for Employers

In order to ready themselves for the October 2025 deadline, businesses in California should also:

✅ Examine AI and ADS tools utilized for hiring, promotions, training, and employment assessments,

✅ Request vendor documentation demonstrating actions taken to minimize bias, data use approach, and assumptions about liability.

✅ Develop bias testing protocols utilizing frameworks reviewed by legal counsel, and fully deploy these prior to testing as well as after deployment,

✅ Modify recordkeeping policies appropriately to hold all ADS-related data for four years as permissible,

✅ Uphold human involvement in AI-related decisions, and  

✅ Educate HR and management-level employees about FEHA protections, the actual ADS restrictions, and liability exposure.

How an Employment Law Attorney Can Help

Understanding these new rules is not only about technology compliance, it’s about safeguarding your organization against discrimination claims, lawsuits, and government sanctions. An experienced employment law attorney can:

• Evaluate underlying compliance risks in your ADS tools and vendor contracts
• Help guide your organization through the bias audit process
• Counsel the organization on recordkeeping and data retention policies
• Provide training for HR and management teams
• Defend your organization in the event of a complaint or lawsuit 

Final Thoughts

With some of the most robust AI regulations in the country, California is placing a significant compliance burden on employers. Even if employers are compliant by the time the regulations go into effect, they may still have legal exposure down the road. Employers who prepare now will minimize risk while also demonstrating a true commitment to fair and transparent workplace practices.

At Strategy Law, our employment law attorneys help California employers navigate changing regulations while being prepared for legal scrutiny. If your company is relying on AI or automated processes in the workplace, now is the right time to prepare. 

Contact us to discuss how we can help your business comply with the new AI regulations in California.

This blog is written as of October 2025.  Recommendations and legal requirements are changing rapidly, so please continue to review our legal updates or review postings on relevant government websites.

All blogs on this site are for educational purposes only, do not constitute legal advice or opinion, and should not be applied to your situation, or any specific situation, without consultation with counsel. Strategy Law, LLP does not provide any legal advice concerning any matter discussed in a blog except upon formal engagement including, without limitation, execution of Strategy Law, LLP’s formal legal services agreement, and with respect to specific factual situations.  No blog constitutes a guaranty, warranty, or prediction regarding the result of any legal matter discussed in the blog or any representation