California Passes Law Restricting Use of AI in Employment Decisions

The California legislature passed the “No Robo Bosses” Act (SB 7), which both prohibits employers from relying solely on AI in employment decisions and establishes significant new AI-related notice requirements.

The bottom line: If signed into law by Gov. Gavin Newsom, impacted employers must ensure that humans remain involved in a wide range of employment decisions, that they avoid using AI for certain specific use cases, and that employees receive extensive pre- and post-AI use notices.

Sole reliance on AI prohibited: Employers may not rely solely on AI or automated decision systems (ADS)—such as determining a potential pay raise for an employee solely through an algorithm—in employment-related decisions, which include:

• Hiring, termination, discipline, and performance evaluations;

• Scheduling, work assignments, productivity requirements, training access; and

• Any decision materially impacting compensation or benefits.

The law also prohibits using AI at all—for:

• Inferring a worker’s protected characteristics (such as race, gender, national origin);

• Preventing compliance with legal requirements; and

• Identifying, profiling, predicting, or taking adverse action against workers for exercising their legal rights (such as union organizing).

Labor relations use cases potentially prohibited: Use of AI and ADS to track or predict union activity may be prohibited. While the scope of the law is unclear as of now, these types of use cases may violate the prohibition in the last bullet above. Mapping broader trends without identifying specific workers may be permissible, though the law’s scope remains an open question.

Notice requirements: Employers must maintain a list of all ADS in use and provide notice:

• To all workers within 30 days of deployment (or, for new employees, within 30 days of hiring).

• To all applicants if ADS will be used in hiring decisions.

• To workers when the employer primarily relies on ADS for discipline, termination, or deactivation.

• The notice requirements in most cases involve extensive disclosures, including that a worker has the right to request a copy of the worker’s data used by the ADS.

Employer considerations if/when the bill is signed into law:

• Conduct a full audit of ADS use across all employment decisions and ensure human involvement in final decisions.

• Begin preparing notices and train managers on what types of notices are required and when.

• Employers that use data scraping in the recruitment process to screen candidates and/or build applicant profiles should make sure that they are not “inferring a worker’s protected characteristics” in doing so.

• Employers that use AI to map labor relations trends should, at the very least, ensure they are not identifying specific employees when doing so.