California Adds Guardrails for Employers When Using AI to Make Disciplinary Decisions

The Details

Effective July 1, 2027, the law prohibits employers from relying solely on ADS when making disciplinary or termination decisions and imposes additional requirements when employers primarily rely on ADS output to make those decisions.

ADS Defined

The law defines ADS as any computational process derived from machine learning, statistical modeling, data analytics, or artificial intelligence that issues simplified output, including a score, classification, or recommendation, that is used to assist or replace human discretionary decision-making and materially impacts natural persons.

The law excludes certain technologies from the ADS definition, including spam email filters, firewalls, antivirus software, identity and access management tools, calculators, databases, datasets, and other compilations of data.

ADS Use in Disciplinary and Termination Decisions

If an employer primarily relies upon an ADS output to make a disciplinary or termination decision, the employer must ensure they conduct a human review to corroborate the decision using data that was collected or used to produce the ADS output or other relevant corroborating or supporting information.

For purposes of this law, “corroborating or supporting information” may include, but isn’t limited to, any of the following:

• Supervisory or managerial evaluations
• Personnel files
• Work product of employees
• Peer reviews
• Witness interviews, which may include relevant online customer reviews

If an employer is unable to corroborate the ADS output, or the human reviewer has concluded that the ADS output is inaccurate, incomplete, or misleading, the employer is prohibited from using the ADS output to make a disciplinary or termination decision.

When an employer has primarily relied on an ADS to make a disciplinary or termination decision, employees have the right to request, and employers must provide, a meaningful and objective description of the employee's data used by the ADS.

Any description of employee data provided under the law must anonymize the personal information of customers, other employees, and other individuals.

Post-Use Notice

An employer that primarily relies upon an ADS to make a disciplinary or termination decision must provide the affected employee with a written post-use notice at the time the employer informs the employee of the decision. The notice must be:

• Written in plain language as a separate, stand-alone communication
• Provided in the language in which routine communications and other information are furnished to employees
• Delivered via a simple and easy-to-use method, including an email, hyperlink, or other written format

The post-use notice must contain all of the following information:

• That the employer primarily relied upon an ADS to make a disciplinary or termination decision with respect to the employee
• That a human reviewed the decision and corroborated the ADS output
• Contact information for the person that the employee may reach out to for more information about the decision and the employee’s right to access a description of the employee’s own data used by the ADS when an employer has primarily used an ADS to make a disciplinary or termination decision
• That the employer is prohibited from retaliating against the employee for exercising their rights under the law

Additional Prohibitions

The law also prohibits employers from using an ADS to:

• Prevent compliance with or violate any federal, state, or local labor, occupational health and safety, employment, or civil rights laws or regulations.
• Infer an employee’s protected status under Section 12940 of the Government Code.
• Predict and take adverse action against a worker for exercising their legal rights, including, but not limited to, rights guaranteed by state and federal employment and labor law.

Employers are also prohibited from retaliating against employees who exercise their rights under the law.

Next Steps

Employers should:

• Inventory any HR, workforce management, productivity monitoring, scheduling, performance management, or employee relations systems that generate scores, recommendations, classifications, or alerts that could influence disciplinary or termination decisions.
• Ensure decision-makers don’t rely solely on automated outputs when making disciplinary or termination decisions. Human involvement should be required before any final action is taken.
• Develop procedures requiring a designated reviewer to independently evaluate supporting evidence and corroborate any ADS-generated recommendation before disciplinary action is imposed.
• Retain records showing the human review process, including supervisory evaluations, personnel records, employee work product, witness statements, customer feedback, or other information used to validate an ADS output.
• Create a process for responding to employee requests for a meaningful description of the employee data used by an ADS in a disciplinary or termination decision, while ensuring personal information belonging to other individuals is appropriately anonymized.
• Monitor future guidance, regulations, or enforcement information that may be issued before the law's July 1, 2027 effective date.