Eight Best Practices for Using AI in Your Business
Estimated read time: 5 minutes
Key Takeaways
Your business remains responsible for fair employment decisions, even when software or an outside vendor helps make them.
California’s employment regulations addressing automated decision systems took effect October 1, 2025. They clarify how existing discrimination protections apply to these tools. [1]
Small businesses can be covered. California’s employment discrimination protections generally apply to employers with five or more employees. [3]
Hiring technology must allow for disability accommodations. A qualified applicant should not lose an opportunity because of an inaccessible assessment. [2]
Review your tools and recordkeeping. California’s rules address retaining employment records, including automated-decision data, for at least four years. [1]
Create an AI policy, train your staff, and keep the policy current. Clear expectations and regular reviews help your team use AI responsibly as tools evolve.
Is AI Already Part of Your Hiring Process?
Running a small business in Santa Barbara, Ventura, or San Luis Obispo County means balancing customers, staffing, and daily operations. Technology that helps you sort applications or identify promising candidates can sound like a welcome time saver.
But before relying on a software-generated score, ask: What is this tool measuring, and could it unfairly exclude someone who can do the job?
You may already use hiring technology that scores resumes, screens qualifications, or evaluates online interviews. The U.S. Department of Justice identifies these as examples of how algorithms and AI can influence hiring. [2]
California’s regulations address automated decision systems more broadly than a chatbot or a product advertised as “AI.” Reviewing what your software actually does is a useful starting point.
California’s Rules Apply Existing Protections to New Technology
California has clarified that using an automated decision system can violate employment discrimination law when it harms applicants or employees because of protected characteristics, such as race, sex, or disability. The regulations also address assessments that elicit disability information and may constitute unlawful medical inquiries. [1]
For small business owners, the message is straightforward: introducing technology does not remove your employment responsibilities.
Small size also does not automatically mean an exemption. Check which employment requirements apply to your business.
This is not only a hiring issue. California’s employment discrimination protections also reach decisions about promotions, compensation, and termination. [3] If you use automated recommendations in those areas, review how they influence the outcome.
When a Hiring Tool Creates a Barrier
Imagine a local business hiring a customer service employee. Its interview software scores applicants based partly on speech patterns. A qualified applicant with a speech disability receives a low score, even though they could perform the essential duties with a reasonable accommodation.
This hypothetical illustrates the concern described in federal guidance: technology can screen out qualified people because of disability rather than accurately assess relevant job skills. Employers must address reasonable accommodation needs unless doing so would create an undue hardship. [2]
A score deserves scrutiny before it becomes a rejection.
Put These Eight Best Practices Into Action
Alongside the legal obligations described above, I recommend these practices to help your team use AI responsibly:
Inventory your tools. Ask whoever manages recruiting, payroll, or performance reviews which features rank, score, recommend, or automatically reject people.
Question your vendor. Ask what the tool measures, how it was evaluated for discrimination, whether it supports accommodations, and which records you can export.
Set job-related criteria. Identify the essential duties and qualifications before reviewing applicants. Be prepared to explain why each assessment matters for that position.
Provide an accommodation contact. Make it easy for applicants to raise accessibility concerns and request an adjustment. Establish who will respond.
Assign meaningful human review and preserve records. Have someone examine questionable results and document decision reasons. Confirm that vendor deletion settings support your retention obligations.
Create an AI policy. Put clear expectations in writing: which tools staff may use, which tasks are approved, what information may be entered, and which decisions require human review. Address confidential business information and applicant and employee data. Identify who approves new tools and who handles questions or concerns.
Train staff on your AI policy. Give employees practical examples relevant to their roles. Show managers how to review AI recommendations, recognize potentially unfair results, protect sensitive information, and respond to accommodation requests. Include training when staff first begin using a tool and when important policies or features change.
Review and update your policy as needed. AI is evolving quickly. Assign someone to monitor changes to your tools, business practices, and applicable requirements. Set a regular review schedule and revisit the policy when you introduce a new tool, a vendor changes a feature, or staff report a problem. Communicate updates and provide refresher training when needed.
Human review is a useful safeguard, but it does not guarantee that a discriminatory process complies with the law.
Need Help Reviewing Your HR Practices?
I help small businesses throughout Santa Barbara, Ventura, and San Luis Obispo counties develop practical HR processes. If you are introducing hiring technology or want to review your current approach, I can help you identify questions for your vendor, clarify hiring criteria, develop an AI policy, and train your staff on responsible use.
Sources
California Civil Rights Department: Civil Rights Council Secures Approval for Regulations to Protect Against Employment Discrimination Related to Artificial Intelligence, June 30, 2025. See also the rulemaking page and approved regulations.
U.S. Department of Justice: Algorithms, Artificial Intelligence, and Disability Discrimination in Hiring, May 12, 2022.
California Civil Rights Department: Employment Discrimination.
Disclaimer
This article is provided for informational purposes only and should not be considered legal advice. Labor laws change frequently and may apply differently depending on the specific facts of each situation. Employers should consult qualified legal counsel or an HR professional regarding their particular circumstances
