California lawmakers have taken a significant step forward in regulating the use of artificial intelligence (\u201cAI\u201d) in the workplace by passing SB 7, a bill aptly referred to as the \u201cNo Robo Bosses\u201d Act.\u00a0If Governor Newsom signs the bill into law\u2014a decision he must make by September 30, 2025\u2014SB 7 would take effect on January 1, 2026 and would have an immediate impact, including prohibiting employers from relying solely on AI to make decisions regarding employee discipline or termination.\u00a0Below, we highlight the most salient aspects of SB 7 and make some recommendations for employers going forward, if Governor Newsom signs the bill into law.\u00a0<\/p>\n
What AI Tools are Covered?<\/p>\n
SB 7 uses the term \u201cautomated decision systems\u201d or \u201cADS\u201d to define AI tools as:\u00a0<\/p>\n
[A]ny 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 decisionmaking and materially impacts natural persons.\u00a0<\/p>\n
This definition covers a broad range of tools, including commonly used AI tools, such as resume scanners, but adds several other broad categories of AI, such as: (1) keystroke or computer system monitoring tools; (2) tools that analyze voice or text (which can be used to analyze interviews or rate employee performance); (3) performance tracking tools; (4) scheduling assistant tools (including in connection with just-in-time scheduling protocols); and (5) training programs or protocols that rely on AI to assess or score performance, among others.\u00a0Any employer that uses an AI tool to assist with any aspect of the employment lifecycle\u2014e.g., hiring, performance evaluation, discipline, promotions, terminations, etc.\u2014should assume SB 7 covers this as ADS tool.\u00a0<\/p>\n
SB 7 Defines \u201cEmployment-Related Decision\u201d Incredibly Broadly.<\/p>\n
SB 7 defines \u201cemployment-related decision[s]\u201d as: \u201cany decision \u2026 that materially impacts a worker\u2019s wages, benefits, compensation, work hours, work schedule, performance evaluation, hiring, discipline, promotion, termination, job tasks, skill requirements, work responsibilities, assignment of work, access to work and training opportunities, productivity requirements, or workplace health and safety.\u201d\u00a0California lawmakers have left little room for interpretation on this front\u2014\u201cemployment-related decision\u201d means virtually all decisions relating to an employee\u2019s employment and does not just encompass hiring or termination.\u00a0<\/p>\n
SB 7 Includes Several Prohibitions and Limitations.<\/p>\n
One significant feature of SB 7 is what it expressly prohibits.\u00a0Most notably, employers may not rely solely on an ADS when making a discipline, termination, or deactivation decision. \u201cDeactivation\u201d is a term often used in the gig economy to refer to a termination and literally references a company \u201cdeactivating\u201d an employee\u2019s access to the company\u2019s systems.\u00a0In addition, employers may not use ADS tools to: (1) prevent compliance with or violate the law; (2) infer a worker\u2019s protected status (e.g., race, gender, national origin, etc.); (3) collect worker data for a purpose not disclosed under the specific SB 7 notice requirements; or (4) \u201c[i]dentify, profile, predict, or take adverse action against a worker for exercising their legal rights\u201d (i.e., retaliate against workers).\u00a0<\/p>\n
SB 7 also places limits on the type\u00a0of data employers can use.\u00a0Specifically, the bill makes clear that employers \u201cshall not use customer ratings as the only or primary input data for an ADS to make employment-related decisions.\u201d For example, if an employee works in a customer-facing role where customers can leave reviews, the employer may not rely solely on those ratings to promote, discipline, or terminate the employee\u2014those decisions must be informed by other data.\u00a0<\/p>\n
SB 7 Places a Premium on Human Oversight.<\/p>\n
As indicated earlier, SB 7 prohibits employers from relying solely on ADS when making a \u201cdiscipline, termination, or deactivation decision.\u201d But employers may rely heavily on them\u2014i.e., employers may, as SB 7 explains, rely \u201cprimarily\u201d on an ADS for such decisions.\u00a0But when an employer \u201crelies primarily\u201d on an ADS to make these specific types of decisions (discipline, termination, or deactivation), the employer must also use a \u201chuman reviewer to review the ADS output and compile and review other information that is relevant to the decision, if any.\u201d\u00a0In other words, SB 7 requires a person to conduct second level review for more significant decisions.\u00a0<\/p>\n
SB 7 offers no guidance on what it means to \u201cprimarily\u201d rely on an ADS to make a given decision as opposed to relying \u201csomewhat\u201d or some different degree.\u00a0Instead, SB 7 leaves this to the employer.\u00a0Whether an employer relies \u201cprimarily\u201d on an ADS or to some lesser degree will likely depend on a combination between the decision at issue and the type of ADS being used, but it is nevertheless an area that will require significant consideration by employers.\u00a0<\/p>\n
Employers Must Provide Notice and Respond to Data Requests.<\/p>\n
SB 7 includes two types of notices that employers are required to provide: pre-use notice and post-use notice.\u00a0<\/p>\n
Pre-Use Notice.\u00a0With respect to pre-use notice, for all employment-related decisions except hiring (which has a separate set of notice requirements), employers must: (1) deliver notice at least 30 days before an ADS is used (or by April 1, 2026 if an ADS is already in use) and within 30 days of hire for new workers; (2) provide notice in writing as a \u201cseparate, stand-alone communication\u201d in the same manner by which other information is provided to workers; and (3)\u00a0provide notice through a \u201csimple and easy-to-use method,\u201d such as email, hyperlink or other similar format. In the hiring context, employers must notify job applicants whether an ADS will be used in making any hiring-related decisions.\u00a0The notice at the hiring stage must include:<\/p>\n
\tThe type of employment-related decisions potentially affected by the ADS.
\n\tA general description of the categories of worker input data the ADS will use, the sources of worker input data, and how worker input data will be collected.
\n\tAny key parameters known to disproportionately affect the output of the ADS.
\n\tThe individuals, vendors, or entities that created the ADS.
\n\tA description of the worker\u2019s right to access and correct the worker\u2019s data used by the ADS.
\n\tAn anti-retaliation notice.
\n\tIf applicable, a description of each quota set or measured by an ADS to which the worker is subject.<\/p>\n
In terms of timing, employers can either provide the required notice upon receiving a job application from a candidate or include the notice on a job posting\u2014SB 7 gives employers a choice.\u00a0<\/p>\n
Post-Use Notice.\u00a0SB 7 also imposes \u201cpost-use\u201d notice requirements where an employer primarily relied on an ADS to make a \u201cdiscipline, termination, or deactivation\u201d decision. Specifically, at the same time the employer notifies the employee of the employment decision (i.e., the discipline, termination, or deactivation), the employer must also provide a written notice (in plain language and as separate, stand-alone communication), that must include:\u00a0<\/p>\n
\tThe \u201chuman\u201d to contact for more information about the employment decision and the ability to request a copy of data relied upon in the decision.
\n\tThat the employer \u201cused an ADS to assist the employer in one or more discipline, termination, or deactivation decisions with respect to the worker.\u201d
\n\tThe worker has the right to request a copy of the worker\u2019s data used by the given ADS.
\n\tAn anti-retaliation notice.\u00a0<\/p>\n
Data Requests and Retention.\u00a0Separately, SB 7 gives workers the right to request (and requires employers to provide) \u201ca copy of the most recent 12 months of the worker\u2019s own data primarily used by an ADS to make a discipline, termination, or deactivation decision.\u201d\u00a0Workers are limited to one such request every 12 months. Likewise, employers must maintain an \u201cupdated list of all ADS currently in use\u201d at a given point in time.<\/p>\n
There is No Private Right of Action.<\/p>\n
Employers can breathe (a little) easier on the enforcement front. SB 7 does not include a private right of action.\u00a0Indeed, the final iteration of the bill expressly cut a portion that would have given aggrieved workers the option of bringing a civil action for damages.\u00a0That said, it is still possible that individual workers could assert alleged violations in a PAGA action.\u00a0Regardless, violations of SB 7 still carry a civil penalty of $500 per violation and the law may be enforced by the Labor Commissioner or local prosecutors.\u00a0While $500 is not steep, penalties could certainly add up if an employer fails to remedy a faulty AI tool that results in dozens of violations impacting several employees (or if an alleged violation forms the basis for a PAGA claim).\u00a0<\/p>\n
Takeaways and Recommendations<\/p>\n
SB 7 represents a significant shift in the regulatory paradigm governing AI in the workplace and (if signed into law) will require California employers to consider how to address AI in the workplace moving forward. If Governor Newsom signs the bill into law, there are a few critical steps employers could take to ensure compliance with SB 7.<\/p>\n
\tReview and Audit All AI Systems.\u00a0Employers should conduct a thorough review of all systems in use to understand where and how AI is being used across the company.\u00a0The first step to compliance is knowledge\u2014you can\u2019t comply with the law until you know what aspects of your workplace are impacted by AI and the extent to which you are using covered ADS tools in the workplace.
\n\tDetermine and Understand Your Reliance on AI.\u00a0Are you relying on AI to make any employment-related decisions?\u00a0If so, how much?\u00a0These are critical questions to ask in determining whether and to what extent you need to comply with SB 7, particularly given the \u201chuman\u201d review requirement that is triggered where an employer relies \u201cprimarily\u201d on an AI tool in a decision involving discipline, termination, or deactivation.\u00a0
\n\tUnderstand and Safeguard Your Data. SB 7 has significant data storage and retention implications, particularly because the law gives employees the right to request and receive their data used by a given AI tool. Because of this, employers need to (a) understand the specific employee data that is used in a given ADS; (b) ensure that such data is stored in an organized an easily accessible manner; and (c) that the storage and\/or use otherwise complies with other data privacy laws in California.
\n\tDraft Notices for Each AI Tool.\u00a0This is another area where employers can get a head start.\u00a0Employers can, and should, draft notices for all AI tools where such notice is necessary, and determine how the notice will be distributed and to whom (i.e., current employees, applicants, etc.).\u00a0Also, employers should consider developing a notice form that is customizable to the extent necessary, particularly where there is a second level \u201chuman\u201d review component that might change based on the type of decision or employee impacted.
\n\tDevelop a Compliance Plan and Process. Establishing processes and procedures to ensure compliance is key and likely the most important next step (or set of steps) employers should consider. This would include: (a) identifying and training individuals who will serve as the \u201chuman\u201d second level reviewers when an employer relies \u201cprimarily\u201d on a covered ADS to arrive at an employment decision; (b) determining how they will respond to employee data requests; (c) outlining how to document the \u201chuman\u201d second level review process to ensure compliance with the law; (d) formulating a process by which employees can correct, supplement, and\/or access their own data used in AI processes; and (e) assessing the degree of reliance on a specific ADS and identifying situations and decision-making processes where human review is either required or needed.<\/p>\n
Employers would be wise to consult with counsel to accomplish these next steps, among others, and Mintz\u2019s Employment Team stands ready to assist any employer looking to comply with SB 7 and any other AI-related laws as they continue to emerge. The Mintz California Employment Practice will monitor this bill going forward and we will update this advisory promptly when Governor Newsom acts.\u00a0<\/p>\n