Calif. Gov. Vetoes Regulation Of AI In Employment Decisions

California Gov. Gavin Newsom vetoed a bill that would have required businesses to make sure humans reviewed termination and disciplinary decisions made by artificial intelligence tools, calling the legislation "overly broad."

The Democratic governor declined Monday to sign S.B. 7, also known as the No Robo Bosses Act, expressing concern in a letter to state lawmakers that the bill's provisions were overly restrictive and lacked specificity.

"Rather than addressing the specific ways employers misuse this technology, the bill imposes unfocused notification requirements on any business using even the most innocuous tools," Newsom said. "This proposed solution fails to directly address incidents of misuse."

The governor added that the measure carried "overly broad restrictions" on employers' use of automated decision systems tools.

The bill, which was authored by Sen. Jerry McNerney, D-Stockton, and received considerable support from the party when it passed both the state Senate and Assembly chambers in September, was sent back to the Senate Monday. In a statement to Law360, McNerney said he respects the governor's decision but disagrees with his position on the bill.

"My office will carefully consider the objections raised in the governor's letter and will work with all stakeholders, including the governor's office, to develop a proposal in 2026 that will provide worker protections from algorithmic decisions that impact their futures by including humans in the decision-making loop without undue burdens on businesses," McNerney said.

The legislation would have ensured humans oversaw any actions to fire or discipline an employee made by an automated decision system, and required companies to notify workers if an ADS was used to make employment-related decisions.

Newsom said in the letter that he agreed with McNerney's concerns that employers can harm workers through the unregulated use of automated technology. But the bill needs to be narrowed in order to be effective, he said.

For example, Newsom took issue with a part of the bill that would prevent employers from using customer ratings as the primary data an automated system uses to make employment decisions, that amounts to any action from an employer that materially impacts a worker's compensation, discipline, promotion, hiring or termination, among other terms.

The governor said this restriction could prevent companies from using automated tools to reward high performers, adding that future legislation should prevent employers from using customer reviews unfairly, rather than banning the practice altogether.

The bill's restrictions stating that employers can't solely rely on automated technology to make termination decisions are also partially covered by forthcoming California Privacy Protection Agency regulations, Newsom said. These regulations would also allow workers to better understand how their personal data is used by automated tech, the governor said.

"Before enacting new legislation in this space, we should assess the efficacy of these regulations to address these concerns," the governor said.

On Monday, Newsom did sign pieces of legislation that aimed to put different kinds of guardrails on AI. He greenlighted legislation that requires developers to put safeguards on companion chatbot platforms to prevent children from forming unhealthy bonds with the tech, as well as requirements that companies must label whether content is AI-generated or authentic.

Republican leaders from both chambers did not immediately respond to requests for comment.

--Additional reporting by Vin Gurrieri. Editing by Neil Cohen.

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