Quick Hits
- Under a new California law taking effect July 1, 2027, employers may not rely solely on an automated decision system when making discipline or termination decisions.
- When an employer primarily relies on an AI-powered tool output for such decisions, a human must corroborate the result.
- The law further requires employers, after primarily relying on a covered tool to make such decisions, to provide affected employees a written “postuse” notice.
Senate Bill (SB) 947 adds Part 5.5.5 to the California Labor Code, governing “Automated Decision Systems in the Workplace.” The signing of SB 947 comes after Governor Newsom’s 2025 veto of a broader predecessor bill. While SB 947 is narrower, it still imposes significant new process requirements and litigation exposure on employers that use algorithmic tools to manage their workforces. The law takes effect on July 1, 2027, meaning employers need to start preparing for compliance.
Covered Tools
SB 947 applies to “automated decision systems,” broadly defined 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 decisionmaking and materially impacts natural persons.” (Emphasis added). “Artificial intelligence” is defined as “an engineered or machine-based system that varies in its level of autonomy and that can, for explicit or implicit objectives, infer from the input it receives how to generate outputs that can influence physical or virtual environments.” The statute expressly excludes spam filters, firewalls, antivirus software, identity and access management tools, calculators, databases, and datasets.
That definition reaches well beyond generative AI. Productivity scoring tools, attendance analytics, performance trackers, and customer-rating systems could all potentially qualify as a covered automated decision system (ADS) if they produce scores or recommendations that factor into employer personnel decisions. “Employer” also includes public entities, labor contractors, and farm labor contractors.
Human-Review Requirement and Prohibited Uses
The core of SB 947 is a two-tier standard for discipline and termination. First, the law expressly prohibits employers from “rely[ing] solely on an ADS” in making a “disciplinary or termination decision.” (Emphasis added). Second, if an employer “primarily relies” on ADS output, the employer must “direct a human to corroborate the decision using the data that was collected or used to produce the ADS output or other relevant corroborating or supporting information.” (Emphasis added). Such information includes supervisory evaluations, personnel files, employee work product, peer reviews, or witness interviews (which may include relevant online customer reviews).
An employer that “primarily relies” on the output of a covered ADS to make a disciplinary or termination decision must direct a human to corroborate the decision using the same information as the ADS.
- If the output cannot be corroborated, or the reviewer concludes it is “inaccurate, incomplete, or misleading,” the employer may not use it to make a disciplinary or termination decision. Notably, the statute does not define “primarily relies,” a gap that will likely be tested in litigation.
- Upon an employee’s request, an employer must provide a “meaningful, objective description of” the data used by the ADS.
The law further expressly prohibits the use of ADS to “prevent compliance” with federal, state, or local laws, or with other occupational health and safety, employment, or civil rights laws and regulations (ostensibly the California Fair Employment and Housing Act (FEHA)). Further, ADS cannot be used to “predict or take adverse action against” workers for exercising their legal rights, including those under state and federal labor law (ostensibly the National Labor Relations Act (NLRA)).
Employee Data Access Rights
When an employer has “primarily used an ADS to make a disciplinary or termination decision,” employees have the right to request, and the employer must provide, “a meaningful, objective description of the employee’s own data” used by the system. Any description must anonymize the personal information of customers, coworkers, and other individuals.
‘Postuse’ Notice of ADS Use
SB 947 further adds stringent notice requirements when an employer primarily relies on an ADS to make (i.e., “postuse”) decisions regarding discipline and termination of employment. Employers must provide a written postuse notice when informing the employee of the decision. The notice must be a plain-language, stand-alone communication, delivered in the language of routine workplace communications, and delivered via a simple method such as email or hyperlink. The notice must state:
- that the employer primarily relied on an ADS,
- that a human reviewed the decision and corroborated the output,
- contact information for a person who can answer questions and explain the employee’s data-access right, and
- that retaliation for exercising rights under the law is prohibited.
Notably, the notice obligation is tied to discipline and termination decisions in which an ADS was the primary basis, not to every employment decision involving an ADS.
Enforcement and Penalties
SB 947 does not create a standalone private right of action. Instead, the labor commissioner may investigate, order temporary relief, issue citations, and file civil actions. Violators face a $500 civil penalty per violation. Additionally, public prosecutors (i.e., the California attorney general, local district attorneys, city attorneys, county counsels, or any other city or county prosecutor) may also enforce the law through civil actions. They may seek injunctive relief, punitive damages, and reasonable attorneys’ fees and costs. Since the law sits in the Labor Code and carries civil penalties, employers may face attempts to enforce claims under California’s Private Attorneys General Act (PAGA), which allows employees to enforce labor code violations on their own behalf and on behalf of other employees.
The law establishes a burden-shifting framework for proving violations of the employer requirements. Once it is shown that an ADS was used to make a disciplinary or termination decision, the employer must show that it “did not primarily rely” on an ADS or that the employer fully complied with the human-review and notice requirements.
The law explicitly exempts employers and employees covered by a collective bargaining agreement (CBA) if the agreement:
- “explicitly waives” the new requirements “in clear and unambiguous terms,”
- “expressly provides for the wages or earnings, working conditions, and other terms and conditions of work,” and
- protects against “algorithmic discrimination.”
Interplay With Other Laws
SB 947 comes as California has moved to the forefront in regulating AI and its use in many contexts, including workplaces, amid federal inaction. The law was one of several signed by Governor Newsom in the latest legislative session, including laws restricting the use of AI-driven workplace monitoring tools to track employees’ behavior and predict their emotional state. Additionally, Governor Newsom recently signed two more executive orders related to AI, including one aimed at exploring whether to require a “kill switch” for frontier AI models.
This latest wave of actions follows California’s adoption of regulations regarding AI and ADS in the workplace, through FEHA in the antidiscrimination context, and privacy mandates such as the California Consumer Privacy Act (CCPA). Beyond California, Colorado, Connecticut, Illinois, New York City, and Texas all have laws that restrict the use of automated decision-making tools for significant or consequential employment decisions, such as hiring, promotion, and termination.
Compliance with SB 947’s notice requirements satisfies substantially similar ADS notice provisions under other state laws. However, that safe harbor does not extend to warehouse quotas or other automated working-condition standards, nor does it exempt CCPA-covered businesses from the California Privacy Protection Agency’s automated decision-making regulations.
Next Steps
With the July 1, 2027, effective date approaching, employers may want to consider inventorying potentially covered ADS tools used, particularly any system that generates scores or rankings or flags actions or makes recommendations regarding discipline or termination, including vendor products embedded in human resources platforms, and assess how such tools are used and whether human review is part of the process of decision-making. Employers may also want to prepare postuse notice templates, establish processes for handling employee information requests, and train managers on the new requirements under SB 947, as well as other state laws and regulations.
Ogletree Deakins’ Artificial Intelligence and Innovation Practice Group will continue to monitor developments and will provide updates on the Artificial Intelligence and Innovation, California, and Cybersecurity and Privacy blogs as additional information becomes available.
In addition, the Ogletree Deakins Client Portal provides subscribers with timely updates on California state laws, including California’s updated laws on Automated Employment Decisions. Premium-level subscribers have access to comprehensive law summaries, policies, and templates. Snapshots and Updates are complimentary for all registered client users. For more information on the Client Portal or a Client Portal subscription, please email clientportal@ogletree.com.
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