As AI and automation tools become increasingly integrated into hiring and workplace operations, California’s Assembly Bill 1018 (AB 1018) is drawing significant attention for its potential to reshape how employers use these technologies. While the bill is intended to enhance fairness and transparency, it also raises important questions about compliance, liability, and practical challenges for businesses across the state.

AB 1018 follows a similar proposal from 2024, Assembly Bill 2930, which failed to advance out of legislative committee. That earlier bill raised many of the same concerns – particularly regarding the broad scope of AI regulation and the feasibility of compliance for employers. While AB 1018 reintroduces these ideas in a revised form, the core issues remain.

If passed, AB 1018 would impose new requirements on employers and other industries that use AI or algorithmic tools in various consequential decisions. In the employment context, this would include hiring and applicant screening, promotions, compensation, performance evaluations, scheduling, shift assignments, disciplinary actions, and terminations.

Under the bill, employers would be required to notify individuals whenever an automated system plays a role in employment decisions. They would also need to conduct annual impact and bias audits, provide employees and applicants the option to opt out of AI-based decisions, and offer a path for human review. Furthermore, businesses would have to limit data usage related to these systems and document their compliance efforts.

Despite the well-intentioned goals of AB 1018, it presents several significant challenges for employers. Many AI systems are developed by external vendors, complicating efforts to conduct the required audits and assessments. Additionally, the requirement to allow opt-outs and mandate human reviews could disrupt existing workflows and increase administrative overhead. The bill’s broad and potentially vague definitions of terms like “consequential decision” and “automated system” further add to the potential for legal uncertainty and exposure. In sum, the bill could have a chilling effect on innovation, particularly for small and mid-sized businesses that use AI tools to improve efficiency and reduce human bias.

AB 1018 makes clear that regulating AI in the workplace is no longer a question of if, but when – whether through this bill or future legislation. While technology should be used responsibly and fairly, it is crucial that new regulations find a balance between protecting workers and avoiding excessive burdens on businesses. Unfortunately, AB 1018 does not strike that balance. Nevertheless, employers must stay informed and be prepared for change that appears to be inevitable if they wish to continue to attract and retain top talent in this rapidly evolving environment.