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New California regulations target discrimination resulting from use of artificial intelligence in recruiting, hiring and employment decisions

8/28/25

By: Mariam E. Grace and Daniel Parker Jett

On June 27, 2025, the California Civil Rights Council (“Council”), supported by California Civil Rights Department (“CRD”) staff, secured final approval for revisions to Title 2 of the California Code of Regulations. The new regulations, which go in effect on October 1, 2025, intend to protect against employment discrimination arising out of employers’ use of artificial intelligence in making employment decisions. The Council amended its regulations to define terms such as “agent,” “employment agency,” “proxy,” “automated-decision system,” “algorithm,” “artificial intelligence,” “automated-decision system data” and “machine learning.”

Key definitions

As defined in the regulations, an “agent” of an employer is considered an employer under the Fair Employment and Housing Act (“FEHA”) and includes “any person acting on behalf of an employer, directly or indirectly, to exercise a function traditionally exercised by the employer or any other FEHA-regulated activity, which may include applicant recruitment, applicant screening, hiring, promotion, or decisions regarding pay, benefits or leave, including when such activities and decisions are conducted in whole or in part through the use of an automated decision system.” [Emphasis added].

Under the regulations, any “computational process that makes a decision or facilitates human decision making regarding an employment benefit” is now called an “Automated-Decision System” (“ADS”). ADSs which may discriminate against individual employees or applicants based on any legally protected status include:

• Questions, puzzles, games or other challenges to make a predictive assessment of an applicant or employee or measure their abilities, characteristics, personality trait, aptitude, attitude or cultural fit, or screen, evaluate, categorize or recommend the applicant or employee;
• Directing job advertisements towards targeted groups;
• Screening resumes for particular terms or patterns;
• Analyzing voice, word choice or facial expression during online interviews; or
• Analyzing employee or applicant data from third parties.

Effect of new regulations

Neither employers nor their agents may use an ADS that discriminates against employees or applicants on any basis legally protected under FEHA in practices relating to employment, pre-employment or selection for employment. Use of an ADS pertaining to medical and psychological examinations and inquiries is also likely to elicit unlawful information regarding the individual’s disability status.

California employers are already required to maintain employment records, including, but not limited to, all applications, personnel records, membership records, employment referral records and selection criteria, for a period of at least four (4) years. Starting October 1, 2025, employers and other covered entities must retain all ADS data for at least four (4) years as well.

We strongly advise that employers thoroughly vet any ADS used in recruitment, hiring or promotion of employees, including those used by third parties, such as headhunters, employment agencies or temporary labor services, to ensure that they will not inadvertently discriminate on the basis of any characteristic that is legally protected by FEHA.

For more information, please contact Daniel Parker Jett at daniel.jett@fmglaw.com or Mariam E. Grace at mariam.grace@fmglaw.com.

Information conveyed herein should not be construed as legal advice or represent any specific or binding policy or procedure of any organization. Information provided is for educational purposes only. These materials are written in a general format and not intended to be advice applicable to any specific circumstance. Legal opinions may vary when based on subtle factual distinctions. All rights reserved. No part of this presentation may be reproduced, published or posted without the written permission of Freeman Mathis & Gary, LLP.