New AI hiring rules and lawsuits put employers on notice: What HR needs to know

Artificial intelligence (AI) is transforming how companies find, evaluate, and hire talent, but it’s also raising red flags among regulators and courts. Two big developments in May 2025 show that HR teams must take a closer look at their hiring tools to avoid legal and compliance risks.

Let’s break it down.

What’s happening in California?

California is preparing to implement new civil rights regulations that are likely to affect the use of automated decision-making systems (ADSs) in employment and other state-supported programs. These rules—expected to take effect as soon as July 1, 2025—aim to prevent discrimination based on protected characteristics like race, gender, age, disability, or religion.

While the regulations don’t ban AI tools outright, they make it unlawful to use any system, automated or not, that results in discriminatory outcomes.

What counts as discriminatory?

The new rules target AI tools that analyze candidates’ voices, facial expressions, personality, or availability, especially if those tools lead to biased outcomes.

Example: An AI tool that interprets not smiling during a video interview as a sign of unfriendliness could unfairly penalize candidates from cultures in which smiling less is common.