Key Takeaways

• Use of Artificial Intelligence in hiring and promotion is undergoing regulatory scrutiny in California

• Tools that screen resumes, rank candidates, or assess interview responses can lead to legitimate claims of bias or discrimination

• Employers must ensure AI tools are transparent, explainable, and tested for adverse impact on protected groups

• The EEOC and the Civil Rights Department may view reliance on opaque (non-transparent) or unvalidated (not tested or verified for accuracy or bias) AI as a violation of anti-discrimination laws

Federal and California agencies have increased their focus on how AI and automated decision-making tools are being used in hiring, promotions, and employment screening processes. Employers using such technologies may be exposed to discrimination claims if these tools lead to disparate treatment or impact on certain races, national origins, genders, ages, or other protected classes, whether intentional or not.

With AI increasingly integrated into recruiting software, such as automated resume filters, personality assessments, and video interview analysis, employers must understand that their use can trigger compliance obligations under federal, state, and local laws, including but not limited to Title VII, the Fair Employment and Housing Act (FEHA), and other emerging AI-specific laws. A misstep could result in reputational damage as well as time-consuming and costly investigations, lawsuits, or enforcement actions.

California is leading the charge in efforts to regulate AI. Earlier this year, a bill known as the “No Robo Bosses Act” was introduced in California. If this bill is passed as written, it will impose strict oversight on automated decision systems (ADS) to prevent discrimination in the workplace. For employers who use ADS and other AI tools for hiring and management, the proposed bill imposes compliance burdens on the employers in addition to compliance requirements for developers of ADS and AI tools. The penalties imposed could be up to $25,000 per violation.

California employers should be mindful that AI tools must be transparent, explainable, and tested for adverse impact on protected groups. The Equal Employment Opportunity Commission and the California Civil Rights Department may view an employer’s reliance on opaque (non-transparent) or unvalidated (not tested or verified for accuracy or bias) AI as a violation of anti-discrimination laws.

Action Items for Employers

• Conduct an internal audit of all recruitment and HR tools using automation or AI.
• Request documentation from vendors showing that tools are validated and tested for bias.
• Train HR and hiring managers on permissible use of AI in decision-making and ensure transparency with applicants.
• Update your privacy and hiring policies to reflect how these tools are used and how candidates can opt out, if applicable.

Employers should proactively evaluate whether their use of AI and automation complies with evolving regulatory standards. Our team is available to help assess risk, recommend compliant practices, and review vendor contracts and systems.

Please contact us to ensure your hiring technology does not create unintended liability.

• Ani Garibyan
• Scott R. Green
• Caroline J. Berdzik
• Or another member of our Employment and Labor group