The era of unregulated artificial intelligence in employment is over. As AI-powered tools become standard in recruiting, screening, and workforce management, states and localities across the country are moving quickly to establish guardrails, and employers who are not paying attention risk significant compliance exposure.

According to recent reports, 99% of Fortune 500 companies now use AI to screen resumes, and more than half of HR leaders rely on algorithms to support hiring decisions. That rapid adoption has prompted a wave of legislation aimed at ensuring these tools do not lead to unlawful discrimination. While no comprehensive federal law has emerged, the patchwork of state requirements is growing fast.

Federal Framework

There is no single federal statute that comprehensively regulates the use of AI in employment decisions. Instead, existing federal anti-discrimination laws, including Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, and the Age Discrimination in Employment Act, apply to AI-driven hiring tools to the extent those tools produce discriminatory outcomes. Employers remain liable for disparate impact caused by algorithmic hiring tools, even when those tools are developed or administered by third-party vendors. 

California

On Oct. 1, 2025, the California Civil Rights Council's Employment Regulations Regarding Automated Decision Systems took effect under the Fair Employment and Housing Act. These regulations define an automated decision system, or ADS, broadly to include any computational process, including AI, machine learning, algorithms, or statistics, used to make or assist in employment decisions. The regulations specifically impact the use of resume filters, online assessments, targeted job ad algorithms, video interview analytics, and predictive hiring models. 

Under the new regulations, California employers must prevent both direct and indirect discrimination from ADS tools, and must preserve ADS-related records for four years. The regulations place value on bias audits and other efforts to avoid unlawful discrimination. 

California is not done, however. Two new bills introduced in the state senate in 2026, SB 947 and SB 951, would go further. SB 947 would prohibit employers from relying solely on ADS for disciplinary or termination decisions and would require human review of any such decision. SB 951 would amend the California WARN Act to require 90 days' advance notice (rather than 60) for layoffs driven by AI or automation, along with detailed disclosure of the AI systems involved. 

Other States and Localities

In addition to California, a growing number of states and localities have enacted their own AI-in-employment laws, each with distinct requirements, and many more have such laws in the works. 

For example, Illinois amended its Human Rights Act (HB 3773), effective Jan. 1, 2026, to prohibit the use of AI in ways that intentionally or unintentionally discriminate against employees based on protected characteristics. The Texas Responsible Artificial Intelligence Governance Act (HB 149), effective Jan. 1, 2026, prohibits the use of AI systems that intentionally discriminate against members of a protected class under state or federal law. Colorado's AI Act (SB 24-205), which is currently set to take effect on June 30, 2026, requires employers to use reasonable care to protect consumers from "algorithmic discrimination," defined as unlawful differential treatment or impact based on protected characteristics under Colorado or federal law. 

Many other states and localities either already have, or are considering implementing, similar or related regulations restricting AI use in employment decisions. 

What Employers Should Do Now

The compliance environment for AI in hiring is only going to get more complex. Employers should take proactive steps now, including auditing all AI tools currently used in recruiting, screening, and employment decisions for potential bias; implementing transparency and notice procedures for applicants and employees; establishing vendor accountability frameworks to ensure third-party AI providers meet legal and ethical standards; training HR personnel and hiring managers on AI compliance obligations; and monitoring legislative developments at both the state and federal levels. 

The message from state legislatures is clear: AI can be a powerful tool in workforce management, but it must be deployed responsibly, transparently, and with meaningful human oversight. Employers who invest in robust AI governance now will be best positioned to manage legal risk while continuing to leverage the efficiency that these tools provide.