What California Employers Should Know About Newsom’s AI Order

When Gov. Gavin Newsom (D) signed his executive order on artificial intelligence-driven workforce disruption last month, most coverage focused on its economic implications. For California employers and employment lawyers, the more important story may be what the order signals about the future of workplace regulation.

The order creates no new private right of action and imposes no immediate compliance obligations. But it offers an early glimpse of where California policymakers may be headed: expanded workforce-displacement protections, greater scrutiny of AI’s role in employment decisions, and increased employer reporting.

California has often led the way in emerging areas of employment regulation. It appears poised to do so again with AI.

Roadmap for Regulation

The executive order directs state agencies to undertake several initiatives that could significantly affect employers that deploy AI in the workplace.

Most notably, the order calls for recommendations regarding potential revisions to California’s Worker Adjustment and Retraining Notification Act. Like the federal WARN Act enacted in 1988, California’s WARN statute was designed for an era of physical plant closures and traditional mass layoffs.

Policymakers are now evaluating whether those notice requirements adequately address workforce reductions associated with automation, including attrition, role consolidation, and the elimination of positions.

The order also directs agencies to evaluate severance, equity, and other worker protection measures. California has historically left severance obligations largely to private agreement. Any effort to establish baseline protections for workers displaced by AI would represent a meaningful shift and could influence both separation practices and future employment claims.

Perhaps most significantly, the order contemplates reporting regarding the role of technology in workforce decisions. As the state collects more information about the relationship between AI adoption and employment decisions, employers should expect increased scrutiny of how those decisions are documented and explained. Internal communications, HR records, manager training materials, and board level discussions concerning AI deployment may assume greater significance in future litigation.

Finally, the order directs agencies to explore broader policy concepts, including worker-ownership models, universal basic capital proposals, and expanded collective bargaining rights.

While those initiatives remain conceptual, they reflect a broader policy interest in ensuring workers participate in the economic gains associated with AI-driven productivity improvements. That perspective is likely to influence future legislative proposals and labor policy debates.

Broader Regulatory Landscape

The executive order arrives against a backdrop of expanding regulation governing AI in employment settings.

California employers are already navigating Civil Rights Department regulations addressing automated decision systems under the Fair Employment and Housing Act, specifically the new requirement that employers preserve ADS data and related records. At the federal level, the Equal Employment Opportunity Commission continues to view algorithmic discrimination as actionable under Title VII and the Americans with Disabilities Act.

Beyond California, New York City’s Local Law 144, the Colorado AI Act, and the EU AI Act have established expectations regarding transparency, bias testing, and oversight that many employers can’t ignore—especially those operating across multiple jurisdictions.

Taken together, these developments increasingly touch every stage of the employment relationship, from hiring and workplace monitoring to performance management and workforce reductions. Future disputes are unlikely to focus solely on whether an AI system made an employment decision.

Questions will concern how AI influenced the decision-making process, how an employer utilized ADS data, what role human decisionmakers ultimately played, and whether employers can clearly explain and document the relationship between the two.

As discovery in AI-related cases becomes more sophisticated, plaintiffs will increasingly seek information concerning algorithmic outputs, validation efforts, internal evaluations, and human-review processes. The adequacy of an employer’s documentation may become as important as the underlying decision itself.

Employer Next Steps

Although Newsom’s recent executive order imposes no immediate obligations, waiting for legislation may prove shortsighted.

Prudent employers should begin by understanding their AI footprint. Many organizations underestimate how many tools may qualify as ADS, including resume-screening software, productivity-monitoring tools, scheduling applications, retention risk models, and generative AI used in performance-management processes. Creating an inventory now is far easier than doing so in response to a private demand, regulatory inquiry, or litigation.

Documentation practices and manager training also deserve renewed attention. Employers should ensure that decisionmakers exercise independent judgment and that legitimate business reasons for employment decisions are clearly memorialized. AI outputs should be treated as informational inputs, not substitutes for managerial decision-making.

Employers contemplating workforce reductions should likewise monitor developments closely. If California expands WARN obligations to address AI-related displacement, planning timelines and compliance requirements may become more complex. Organized labor is already raising issues related to AI deployment, workplace monitoring, and automation protections in collective bargaining. California’s focus on workforce disruption is likely to accelerate those discussions.

The Path Ahead

Whether California ultimately adopts all of the initiatives contemplated by the executive order remains uncertain. What is clear is that AI is becoming a subject of employment regulation rather than merely a workplace tool.

For employers and their counsel, the question is no longer whether AI will become an employment-law issue. The question is how quickly employers can adapt to the obligations and risks that are already beginning to emerge.

This article does not necessarily reflect the opinion of Bloomberg Industry Group Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Adam Maldonado is partner at Hirschfeld Kraemer in San Francisco, where he represents employers in employment litigation and workplace investigations.

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