New California AI Legislation to Impact Employers

As employers in California make their staffing plans for 2026, they should be aware of new legislation that will impact their use of automated-decision systems (ADS) and automated decision-making technology (ADMT) for certain HR-related tasks.

ADS rules under the Fair Employment and Housing Act

Legislation that went into effect on October 1, 2025, amends the California Fair Employment and Housing Act (FEHA), adding new rules that apply to employers’ use of ADS. According to DLA Piper, these rules apply to ADS that are used to:

• Direct job ads or recruiting materials to targeted groups.
• Screen resumes for certain terms or patterns.
• Analyze facial expressions, word choice, or voice in online interviews.
• Analyze employment or applicant data sourced from third parties.

The rules also apply to ADS used in computer-based assessments to:

• Make predictive assessments about applicants or employees.
• Measure skills, reaction time, or other abilities.
• Measure personality traits, aptitude, and/or cultural fit.
• Screen, evaluate, categorize, or recommend applicants.

This amendment increases the risks associated with the use of ADS in the workplace, even in cases where the ADS was developed or administered by a third-party vendor. Employers may be liable if they use ADS in employment decisions which produce results that disproportionately impact members of a protected group.

ADMT rules under the California Consumer Privacy Act

New rules under the California Consumer Privacy Act (CCPA) were finalized on September 23, 2025, and will go into effect on January 1, 2026.

Attorneys at law firm Littler note that the regulations will be “the most stringent requirements in the United States on employers’ use of artificial intelligence and other automated tools in employment decision-making.”

Scope

The ADMT rules apply to mid-to-large, for-profit companies that:

• Do business in California.
• Have gross annual revenues exceeding $26.6 million USD or process large volumes of personal data.
• Use automated decision-making technology to do things such as hire, pay, promote, and terminate employees as well as assign work.

The provisions concern only the personal information of California residents.

ADMT definition

The act uses a broad definition of ADMT, referring to it as “any technology that processes personal information and uses computation to replace human decision-making or substantially replace human decision-making.” The regulation may even apply to rule-based tools — for example, those that use an algorithm to screen out job applicants that lack a particular certification.

The regulation’s definition of ADMT also covers profiling technologies that “analyze or predict … intelligence, ability, aptitude, performance at work, … [or] reliability.”

Requirements

Companies that fall within the law’s scope are required to: conduct detailed risk assessments; provide pre-use notices that explain the specific purpose of the ADMT and how it makes significant decisions, among other things; and respect certain opt-out and access rights.

The risk assessment must consider whether the privacy risks of the ADMT outweigh its benefits to the consumer, business, and other stakeholders. If it’s determined that the risks outweigh the benefits, the employer must take steps to sufficiently mitigate those risks or end its reliance on the technology.

With the new year rapidly approaching, California employers that fall within the scope of the ADMT rules should examine their use of automated technologies, determine how the rules apply to them, and set processes to ensure compliance.

Sources: Littler, DLA Piper, CDF Labor Law

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