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California has enacted a new artificial intelligence transparency law that significantly reshapes how businesses deploy and disclose the use of AI systems.
Violations of these requirements can lead to penalties, making it crucial to consult an experienced Orange County employment lawyer to navigate complex employment law obligations and ensure compliance. Schedule your free consultation today.
Artificial intelligence systems already influence hiring decisions, credit approvals, performance evaluations, scheduling, advertising, and customer service interactions. In many cases, individuals have no way of knowing whether a decision was made by a human, an algorithm, or a combination of both.
California lawmakers identified transparency as a necessary first step toward accountability. Without disclosure, individuals cannot challenge biased outcomes, identify errors, or understand how decisions were reached. The new law aims to reduce secrecy around automated systems and create a clearer line of responsibility for businesses that rely on AI.
The law imposes disclosure obligations on businesses that use artificial intelligence in certain contexts. While the exact requirements depend on how the technology is deployed, the law generally requires organizations to inform individuals when AI is being used in a meaningful way. Key obligations include:
These requirements apply regardless of whether the AI system is fully automated or assists human decision-makers.
Employers are among the most affected by AI transparency obligations. Many companies already use AI tools for recruiting, resume screening, productivity monitoring, scheduling, and performance evaluation. Under the new law, employers may need to disclose when these tools influence employment-related decisions.
Failure to provide proper notice may expose employers to legal risk, particularly if AI systems produce biased or discriminatory outcomes. Additionally, transparency does not excuse unlawful conduct. Instead, it increases scrutiny by making AI use visible to employees and regulators.
Employers must now carefully evaluate how AI tools are implemented, documented, and communicated within the workplace.
The law also addresses consumer-facing AI systems. Businesses that use AI-driven chatbots, virtual assistants, or automated content generation must ensure that users understand they are interacting with artificial intelligence. This requirement responds to concerns about deception, manipulation, and misinformation.
As AI-generated content becomes more realistic, disclosure helps preserve trust and allows individuals to make informed choices about how they engage with businesses and platforms.
When employers use AI systems without disclosure, employees may never realize that an algorithm played a role in hiring, scheduling, evaluations, or discipline. If an AI tool produces biased results or relies on flawed data, employees need to know that automation is involved before they can challenge the decision or seek accountability.
Compliance may present practical challenges. Companies must identify where AI is used, assess its role in decision-making, and update policies, training, and disclosures accordingly. Businesses that rely on third-party AI tools may also face difficulties obtaining sufficient information to meet transparency requirements.
However, ignoring these obligations carries greater risk. Regulatory enforcement and private litigation are likely to increase as awareness of AI-driven decisions grows.