On October 1, 2025, California will participate in an increase in jurisdictions that regulate the use of automated decision systems (ADSs) in employment decisions. California employers should review the use of advertising in employee selection and evaluation to ensure compliance with the state's amended Fair Employment and Housing Act (FEHA) regulations and mitigate legal risks associated with algorithmic discrimination.
Use an automated decision system in employment
The revised FEHA regulations extend the definition of “employer” to include agents acting directly or indirectly on behalf of an employer, including ADS support. Regulations broadly define advertising as “a computational process that makes decisions or promotes human decision-making.” These systems, which utilize data and algorithms (such as artificial intelligence and natural language processing models), are increasingly being used by employers to screen job seekers and assess employee performance. Specifically, the rules cite the following example of the tasks performed by the ad:
- A computer-based assessment that provides predictive assessments of the applicant or employee's skills, abilities, personality, aptitude, or applicant or employee.
- Job ads or hiring efforts directed to a specific group.
- resume screening;
- Analyse applicants' voices and/or mannerisms during the interview. or
- Analyze employee or applicant data from third parties.
The regulations make it clear that it is illegal for an employer to use advertising or selection criteria that discriminate against an applicant, employee, or class of applicants or employees based on protected characteristics. Regulations provide examples of how AD can lead to discrimination, such as by analyzing the disadvantages of individuals with a particular disorder, such as measuring applicant skills and reaction times, or the tone of voice or facial expressions that can be identified based on race, national origin, disability, or gender. Therefore, employers must consider whether the use of advertising is discriminatory and may be obligated to provide reasonable accommodation to applicants and employees.
Key provisions for the new rules
- Prohibiting discriminatory use: Employers are prohibited from using AD in a way that distinguishes individuals or classes of individuals based on the characteristics that Feha protects.
- Positive defense: Employers can argue positive defenses when using anti-bias testing or similar aggressive measures to prevent illegal discrimination in the use of ADS.
- Record-keeping: Employers must keep records of advertising data in addition to their existing obligation to keep records of personnel actions. Regulations will further increase the required record retention period from 2 to 4 years.
Takeaway for Employers
- Check existing use of advertising and implement anti-bias measurements: Employers should review current advertising use and consider implementing anti-bias testing and policy to prevent illegal discrimination. Regular bias audits and anti-bias testing are recommended to evaluate AI tools. Employers considering using advertising in employment decisions may wish to limit the use of automated tools to tools that have been validated under the U.S. Equal Employment Opportunity Commission (EEOC) unified guidelines on employee selection procedures. Employers should also consider implementing policies on the use of AI and procedures to prevent illegal discrimination in advertising-supported employment decisions.
- Keep the record: Beyond the requirements for retaining advertising data under modified regulations, employers must maintain a record of all data used and generated by advertising in employment decisions. This includes corresponding decisions and bias audits. This will help document efforts to prevent illegal discrimination.
- Consider an indemnification agreement: Given the expanded definition of “employer” that includes agents acting directly or indirectly on behalf of an employer, you should consider using an employer or third party recruiter using an employer.
California is seeing an increasing number of jurisdictions regulating the use of AD and AI in employment decisions. Employers must provide information regarding changes to regulations in order to continue to comply with applicable state and local laws.
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