Please enjoy this blog authored by Adam Wehler, Director of eDiscovery and Litigation Technology, Smith Anderson.
1. What It Is (and Isn’t)
Effective October 1, 2025, California’s Civil Rights Department will enforce regulations
clarifying how the Fair Employment and Housing Act (FEHA) applies to automated
decision-making systems (ADS) used in employment. The key here is that this isn’t a new law with new fines but its a clarification that existing anti-discrimination rules fully apply when AI or algorithms are used in hiring, promotion, and other HR decisions.
2. Why It Matters
• Employers remain responsible for discrimination even if caused by an AI or vendor tool.
• Note that ADS is very broadly defined as any “…computational process that makes or assists in making an employment decision regarding an employment benefit.”
• Disparate impact (unintentional bias) still creates liability under FEHA.
• Employers must retain ADS data and decision records for at least four years.
• HR and Legal must ensure bias testing, vendor oversight, and documentation are in place.
3. The Real-World Effect
While the regulation doesn’t set new fines or penalties, it eliminates ‘plausible deniability.’
Employers can no longer claim that discrimination resulted from a third-party AI system. The
rule expands liability, lowers the evidentiary bar for bias claims, and forces documentation and
testing. It’s more about broadening accountability and might have a chilling effect on use of AI tools
4. The Takeaway for Legal Ops & HR Leaders
• Outsourcing hiring to AI means you must work harder, not less, to prevent discrimination.
• Implement structured bias audits and record retention practices.
• Review and update vendor contracts—require bias testing and audit rights.
• Build a cross-functional AI governance group (Legal, HR, IT, Data).
Bottom Line
The California ADS regulation isn’t a ‘nothing burger’ but basically underlines that discrimination is the employer problem FULL STOP. It sets the compliance foundation for future HR action in California and will probably be a template to be used in other states. For now, the smartest move is proactive governance, vendor diligence, and transparent HR AI use.
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