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Background
Employers are increasingly relying on artificial intelligence and automated decision systems (ADS) in workplaces across California and the world as avenues to boost productivity or achieve cost savings. However, some state legislators have raised concerns about the lack of worker protections and oversight in discipline and termination decisions made by ADS.
In 2025, California legislators attempted to address these risks through SB 7, which passed in both the California State Senate and Assembly but was ultimately vetoed by Governor Newsom.
In response, on February 2, 2026, State Senator Jerry McNerney reintroduced SB 947, an updated version of SB 7. SB 947 addresses the governor's concerns, as outlined in his veto letter. Governor Newsom was concerned about SB 7's "unfocused notification requirements on any business using even the most innocuous tools" and the "overly broad restrictions on how employers may use ADS tools."
SB 947 requires only post-use notice and more clearly details the scenarios in which employers are prohibited from using an ADS, such as for predictive behavior analysis or compensation decisions.
Key Provisions of SB 947
Scope and Definitions
SB 947 amends Division 2 of the California Labor Code to create a legal framework regulating the use of ADS. ADS are defined as "any computational process derived from machine learning, statistical modeling, data analytics, or artificial intelligence" that replaces human discretion in issuing scores, recommendations, or other decisions that significantly impact workers.
Major Requirements and Prohibitions
The proposed legislation prohibits employers from relying solely on an ADS to make disciplinary or termination decisions. It requires employers to apply human review and independent corroboration before acting on the output of an ADS for these purposes.
Specifically, under the proposed legislation, an employer may not use an ADS to (1) conduct predictive behavior analysis, in which the ADS predicts or infers a worker's behavior, beliefs, intentions, personality, or emotional state; (2) infer protected statuses, such as race, religion, gender; or (3) identify, profile, predict, or take adverse action against a worker for exercising their legal rights.
Employers are also prohibited from "us[ing] or rely[ing] upon individualized worker data as inputs or outputs to inform compensation unless the employer can clearly demonstrate that any differences in compensation for substantially similar or comparable work assignments are based upon cost differentials in performing the task involved, or that the data was directly related to the tasks that the worker was hired to perform." This rather ambiguous language could have an impact on the way employers prepare for and perform pay equity analyses.
Additionally, under the proposed legislation, employers using ADS to assist in making discipline or termination decisions must provide timely, plain-language, written post-use notice to the affected worker. This notice must include details on the ADS, the data used, human reviewer contact information, and an anti-retaliation provision. Workers can request copies of their own ADS-related data once every 12 months.
The proposed legislation provides for enforcement through (1) the state labor commissioner, (2) a private right of action by workers, and (3) actions by public prosecutors. Civil penalties of $500 per violation apply, along with possible punitive damages and attorney's fees.
Effects on Employers
If enacted, SB 947 will create significant operational, compliance, and risk management challenges for employers using or considering ADS in California workplaces. Violations of this new law could expose employers to administrative penalties, civil liability, and reputational risk.
Additionally, this legislation would require employers to severely limit reliance on automated tools supporting discipline or termination decisions; SB 947 would require meaningful human involvement and corroborating evidence going forward as to such decisions, arguably limiting any efficiencies gained by using such tools.
References:
- https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202520260SB947
- https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=202520260SB7
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