States Tighten Regulations on AI-Driven Job Displacement

Imagine getting fired by an algorithm. No manager sits you down. No explanation beyond a system flag. Just an automated decision and you’re out. It sounds like science fiction, but it’s increasingly a real workplace scenario. And now, state governments across the country are stepping in to say: not so fast. Complete the form to unlock this article and enjoy unlimited free access to all PYMNTS content — no additional logins required. yesSubscribe to our daily newsletter, PYMNTS Today. By completing this form, you agree to receive marketing communications from PYMNTS and to the sharing of your information with our sponsor, if applicable, in accordance with our Privacy Policy and Terms and Conditions. Δdocument.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); A wave of new laws is rewriting the rules for how companies can use artificial intelligence when they hire, manage, and fire workers. California, Colorado, Illinois, and Texas all have major AI employment regulations either already in effect or set to kick in this year. And the legislation keeps coming. Law firm Perkins Coie laid out the landscape in a detailed briefing this week, flagging two new California bills that could significantly raise the stakes for employers. Both bills are currently moving through the state’s legislature. The first, Senate Bill 947, takes direct aim at the growing use of AI in workplace decisions. Under the measure, companies would be banned from using automated systems as the sole basis for firing or disciplining a worker. A human would have to review the decision — and there would need to be supporting evidence, such as manager evaluations or witness interviews, to back it up. If the evidence doesn’t hold up, the AI’s recommendation gets thrown out. We’d love to be your preferred source for news. Please add us to your preferred sources list so our news, data and interviews show up in your feed. Thanks! The bill also targets a practice that has quietly spread in gig and platform work: using customer ratings as the main factor in employment decisions. That would be prohibited outright. Workers would also have the right to sue their employers directly, with the possibility of collecting damages, punitive awards, and legal fees. A $500 civil penalty per violation would apply on top of that. The second bill, SB 951, tackles mass layoffs driven by automation. Right now, California companies must give workers 60 days’ notice before a large-scale layoff. This bill would push that to 90 days and it would require companies to spell out exactly which AI or automated tool triggered the job cuts, who built it, and why it was used. The notice threshold would also drop, capturing layoffs of as few as 25 workers, down from the current 50. Related: States Move to Regulate Workplace Tech as Automation, Monitoring Spread Across Sectors “The regulatory landscape governing AI in employment is expanding rapidly,” the Perkins Coie briefing states, “with several jurisdictions implementing distinct requirements that create a complex compliance environment for multistate employers.” That complexity is only growing. Beyond California, three other states are adding their own rules this year. Colorado’s AI Act takes effect June 30 and requires employers to actively guard against AI systems that produce biased outcomes based on race, gender, or other protected characteristics. Illinois went live with similar protections in January, adding a requirement that companies notify workers any time AI influences an employment decision. Texas also enacted a law in January, prohibiting intentional discrimination through AI, though the state sets a higher bar, ruling that statistical disparate impact alone is not enough to prove a violation. What comes next will depend heavily on the courts, regulators, and the outcome of California’s two pending bills. Governor Gavin Newsom (D) already vetoed an earlier version of SB 947 last October, citing concerns that it was too broadly written. The current bill is a revised attempt to address those objections but whether it clears Newsom’s desk this time remains an open question. For employers, Perkins Coie recommends taking action now: audit every AI tool used in hiring, performance reviews, or terminations; train HR teams on what the new rules require; and map out which state laws apply to which workers. The firm’s advice is pointed: companies that build in human oversight and keep clear documentation will be far better positioned when regulators come knocking. Bank Regulators Clarify That Crypto Qualifies as Collateral Under Capital Reserves Rule

Mar 6, 2026 by