The California Civil Rights Council (CRC) recently approved regulatory amendments under the Fair Employment and Housing Act (FEHA) that directly address the use of automated-decision systems (ADS) in employment practices. These updates, which are expected to take effect on July 1, 2025, clarify that existing FEHA protections apply when employers use technology-driven tools in hiring and other employment decisions.
What Is an Automated Decision System?
The regulations define an ADS as any computational process, including those involving artificial intelligence (AI), machine learning, or algorithms that make or supports decisions about employment benefits. Examples of ADS use include:
- Screening resumes based on keywords or patterns
- Delivering targeted job advertisements
- Analyzing facial expressions or voice during video interviews
- Measuring skills, traits, or “cultural fit” through online assessments
Notably, basic tools like spreadsheets or databases are excluded, unless they are used to make employment decisions.
Key Compliance Obligations for Employers
Under the amended regulations, it is unlawful to use an ADS that directly or indirectly results in discrimination based on any FEHA-protected characteristic (e.g., race, sex, age, disability). These updates bring:
- Increased Liability: Extended liability to third-party agents, including vendors or service providers that act on behalf of the employer in employment decisions.
- Requirements to Test AI Systems: Emphasis on the importance of anti-bias testing, noting that evidence of such testing or lack thereof may be relevant in defending against discrimination claims.
- Expanded Recordkeeping Requirements: Recordkeeping requirements have been expanded to require employers to retain all records related to any employment decision made using an ADS, including applications, selection criteria, and ADS outputs from three (3) years from the date of creation and four (4) years from the date of termination of an employee or non-hire of an applicant to four (4) years.
Next Steps for Employers
The CRC regulations must be submitted to the California Office of Administrative Law (OAL), which has 30 working days to review and approve them. Once approved, they will be filed with the Secretary of State and are expected to take effect on July 1, 2025, or October 1, 2025, if filed later than anticipated.
To prepare for the regulations’ anticipated effective date, employers should:
- Inventory and assess current ADS tools to ensure they support legitimate, nondiscriminatory employment practices.
- Audit outcomes of these tools periodically for potential bias and maintain documentation of any anti-bias testing performed.
- Update record retention policies to align with the new four-year requirement for all ADS-related employment decisions.
- Review vendor contracts and ensure third-party providers are aware of their obligations under FEHA.
