On June 27, 2025, the Civil Rights Council of the California Civil Rights Department finalized amendments to regulations enacted under the Fair Employment and Housing Act (“FEHA”) that impose sweeping new regulatory requirements on employers’ use of Artificial Intelligence (“AI”) and Automated-Decision Systems (“ADS”) in employment decision-making.
These amendments, set to take effect on October 1, 2025 , represent one of the most comprehensive state-level efforts to regulate the potential discriminatory effects of AI’s application in the workplace.
Broad Definition of ADS
ADS is defined broadly to include any computational process used to aid or replace human decision-making in employment contexts, including tools that evaluate, score, filter, rank, or recommend applicants or employees.
Examples include:
- Resume screening software
- Video interview analytics
- AI-driven chatbots or virtual recruiters
- Personality or cognitive assessments
- Productivity or behavioral scoring systems
Importantly, the rules apply even if the tool does not make the final decision but merely influences it.
Prohibited Uses
Under the amended regulations, employers may not use an ADS that discriminates against an applicant, employee, or class of applicants or employees on the basis of any category already protected by the FEHA (i.e., race, national origin, sex, gender, disability, religion, pregnancy, etc.). In other words, a covered software or tool that has the effect of weeding out applicants from a protected group would run afoul of the law and expose an employer to liability.
Possible Defenses
The amendments specifically say that there may be “available defenses” to a claim brought by an employee who alleges unlawful use of AI. While the potential defenses are not listed, the amendments do identify evidence that may be relevant to such defenses, including anti-bias testing or similar proactive efforts to avoid unlawful discrimination, including the quality, efficacy, recency, and scope of such effort, the results of such testing or other effort, and the response to the results. Thus, it is important for employers to engage in and document “proactive efforts” to avoid discrimination.
Recordkeeping Requirements
The amendments also impose enhanced recordkeeping requirements on employers. Employers must retain documents relating to any employment practice affecting applicants or employees. This includes, as a few examples:
- Applications;
- Personnel records
- Selection criteria; and
- ADS data (including that relating to inputs, outputs and settings).
This retention requirement applies for four years and includes documents created or received by an employer or other covered entity.
Liability for Third-Party Actions
It is also noteworthy that the amendments expand the scope of employer liability to some employer vendors. For example, vendors providing applicant recruitment, applicant screening, and pay, benefits and leave decision-making services on an employer’s behalf that use ADS in hiring or employment decisions may likewise face exposure for conduct that violates FEHA.
Takeaways
California’s newly enacted FEHA amendments establish a significant new regulatory regime for employers relying on AI and automated tools in the workplace. These regulations reflect growing concern among policymakers and regulators over the risk of algorithmic bias and systemic discrimination in employment practices.
Employers should not assume that commercially available AI tools are legally compliant. Now is the time for California employers to ensure that their use of AI-based employment tools does not lead to unintended discriminatory consequences and that they have engaged in anti-bias testing or other “proactive measures” that would help them defend against an FEHA claim for unlawful use of AI.
