Navigating the Growing Landscape of State AI Employment Bills and Laws: What Employers Need To Know

Key Takeaways

• Two bills recently introduced in California’s State Senate, SB 947 and SB 951, if enacted, would significantly affect compliance obligations for employers.
• SB 947, which is broadly drafted to include both traditional employees and independent contractors, aims to limit—if not fully prohibit—the use of AI systems in employment decisions.
• SB 951 seeks to amend California's Worker Adjustment and Retraining Notification Act (Cal-WARN) to account for employees whose employment was ended due to the use of AI or other automated technology.

California continues to expand regulations over AI in employment decision-making—a hot-button topic across states that employers should monitor closely.

California ramped up its regulation of employers' use of AI with hiring rules that took effect on October 1, 2025. The Civil Rights Council of the California Civil Rights Department finalized amendments under the Fair Employment and Housing Act (FEHA) addressing automated decision systems (ADS) in the workplace. The regulations define ADS as computational tools that make or assist employment decisions, including AI- or algorithm-based resume screeners, targeted ads, assessments, and interview analytics. The regulations prohibit employers from using ADS or selection criteria that discriminate against applicants or employees based on protected characteristics under FEHA.

Both SB 947 and SB 951 would expand AI restrictions further.

SB 947

Introduced by Senator Jerry McNerney, SB 947 is a revised version of SB 7, the “No Robo Bosses” Act, which was vetoed by Governor Gavin Newsom on October 13, 2025.[1] Overall, the bill seeks to prohibit or severely restrict the unfettered use of AI systems in employment decisions. In addition, the bill is drafted in the broadest terms to include not only traditional employees but also independent contractors. Under this bill, the state would prohibit employers from (1) using ADS to violate any federal, state, or local labor, employment, or civil rights laws; (2) inferring an employee’s protected status under FEHA; (3) conducting predictive behavior analysis; and (4) taking adverse action against employees for exercising their legal rights. 

Further, the bill would prohibit using individualized worker data as inputs in compensation decisions “unless the employer can clearly demonstrate that any differences in compensation for substantially similar or comparable work assignments are based upon cost differentials in performing the tasks involved, or that the data was directly related to the tasks that the worker was hired to perform.”

SB 947 would prohibit employers from relying solely on ADS for disciplinary or termination decisions. Rather, such decisions would require a human reviewer to conduct an investigation to determine whether the decision was correct. While ADS may assist in the decision, the decision must be supported by corroborating information, such as managerial evaluations, work reviews, and witness interviews. If an employer determines that the corroborating information does not support the determination, the bill would prohibit the employer from using the ADS output. One feature of the bill appears unrelated to ADS: The bill broadly prohibits the use of customer ratings as the only or “primary” input in an employment-related decision.

The law includes broad notice requirements where ADS assists in making disciplinary, termination, or “deactivation” decisions. If ADS assists in such decisions, the employer must notify the worker that ADS was used, confirm that a human reviewed the decision, identify the contact information for the human who reviewed the decision, and state that retaliation for challenging the decision is prohibited.

The bill’s enforcement provision includes not only labor commissioner charges but also a private right of action for aggrieved workers who can seek damages caused by adverse action, including injunctive relief, punitive damages, and reasonable attorneys' fees. Employers would also be subject to a civil penalty of $500.

SB 951

Introduced by Senator Eloise Gomez Reyes, SB 951 would amend California's Worker Adjustment and Retraining Notification Act (Cal-WARN) for displacement or termination decisions that are driven by the use of AI or other automated technology. Key provisions include:

• Longer notice period. Employers would be required to provide at least 90 days' advance written notice prior to a mass layoff, compared to the current 60-day requirement under Cal-WARN.
• New notice requirements. The notice must include information related to AI or automation, including the specific job functions that will be automated, the AI system or automating technology that led to the displacement (including the entities that developed, sold, or leased the technology), and the justification and purpose for using the AI tool.
• Reporting obligations. Employers would need to provide notice to affected workers, the Employment Development Department, and local officials.
• Lower workforce threshold. Notice would be required prior to a layoff affecting 25 or more workers, or 25% of the workforce (whichever is less), compared to the current Cal-WARN threshold of 50 or more employees laid off within a 30-day period. Notably, the threshold applies to traditional employees and independent contractors. However, seasonal workers would not be included in the worker count.
• Affected worker bidding priority. Employers with more than 100 employees would be required to provide each affected employee with the right of first bid on other job positions with the employer.

Other State Developments

In addition to states where obligations are in place, Colorado, Illinois, and Texas have laws that are set to take effect this year. 

Colorado

Colorado's AI Act (SB 24-205) takes effect on June 30, 2026. The law requires employers to use reasonable care to protect consumers from "algorithmic discrimination," defined as unlawful differential treatment or impact based on protected characteristics under Colorado or federal law. A narrow exemption applies to employers with fewer than 50 employees who do not use their own data to train their AI systems.

Illinois

Illinois HB 3773, effective January 1, 2026, prohibits the use of AI in ways that intentionally or unintentionally discriminate against employees based on protected characteristics. Draft rules from the Illinois Department of Human Rights would require employers to notify employees and applicants whenever AI is used to influence employment decisions, with disclosures covering the AI product, its purpose, the data it collects, and a point of contact. The draft rules also impose a four-year recordkeeping requirement.

Texas

The Texas Responsible Artificial Intelligence Governance Act (HB 149), effective January 1, 2026, prohibits the use of AI systems that intentionally discriminate against members of a protected class under state or federal law. Under Texas law, however, disparate impact alone is not sufficient to demonstrate an intent to discriminate.

Employer Action Items

As laws regulating the use of AI in employment decisions continue to proliferate, employers should take proactive steps to ensure compliance. Practical next steps include the following.

Analyze Current AI Systems

Identify all AI tools and automated decision systems currently used in employment-related processes, including recruitment, hiring, performance management, and termination decisions. Employers should also test AI systems for potential algorithmic discrimination and document mitigation efforts, which may also support defenses under laws like Colorado's AI Act. It is also worthwhile to audit any AI systems used to inform compensation decisions to ensure pay differentials can be justified by legitimate, job-related factors.

Train HR and Management

Educate human resources personnel, hiring managers, and supervisors on AI compliance requirements and the importance of human oversight in employment decisions.

Assess Jurisdictional Exposure and Monitor Legislative Developments

Determine which state AI laws apply based on where employees and applicants are located, and map compliance obligations accordingly. Employers should also continue tracking proposed AI legislation at the state and federal levels, as this area of law is rapidly evolving.

The regulatory landscape governing AI in employment is expanding rapidly, with several jurisdictions implementing distinct requirements that create a complex compliance environment for multistate employers. As these laws take effect and new legislation continues to emerge, employers that invest in robust AI systems with transparent human oversight will be best positioned to mitigate legal risk while continuing to leverage AI tools in their workforce operations.

Endnote

[1] Governor Gavin Newsom vetoed the measure on the grounds that it imposed overbroad notification requirements and restrictions on how employers may use ADS tools.