What California’s AI regulations mean for your company
Among U.S. states, the Golden State is usually a frontrunner, proposing legislation and regulations years before the rest. So, it should be little surprise that the rest of the U.S. is paying close attention to proposed AI regulations in California.
In May 2024, the California legislature advanced dozens of AI measures, the New York Times reported. The regulations aimed to protect jobs and consumers, yet industry insiders feared they could shake up the job market, national security and even national elections.
“Very powerful technology brings both benefits and risks, and I want to make sure that the benefits of AI profoundly outweigh the risks,” State Senator Scott Wiener told the Los Angeles Times.
But California governor Gavin Newsom wasn't convinced that this legislation was the way forward, leaving the landscape of the state's AI regulation in flux. Read on to learn more about the current state of AI regulations in California.
California’s SB 1047
Officially titled the Safe and Secure Innovation for Frontier Artificial Intelligence Models Act, California's SB 1047, was a legislative measure designed to promote the responsible use of AI technologies. The bill mandated transparency, accountability and ethical standards for organizations deploying AI systems within the state. It reflected a comprehensive approach to managing AI's impact on society, particularly concerning privacy, discrimination and consumer protection.
Despite the ambitious proposal, California Governor Gavin Newsom vetoed the landmark legislation. The decision came as a major setback for those advocating for stringent AI safety measures. Newsom expressed concerns that the proposed bill could stifle innovation and hinder the competitiveness of California's burgeoning AI industry.
“While well-intentioned, the bill does not take into account whether an AI system is deployed in high-risk environments, involves critical decision-making or the use of sensitive data,” Newsom stated.
California’s new approach to AI regulation
Instead of the sweeping regulations initially proposed, Governor Newsom announced a partnership with industry experts, including AI pioneer Fei-Fei Li, to develop more balanced and effective AI guardrails. This collaboration aims to formulate legislation that imposes responsible regulations without stymying innovation.
Other AI regulations in California
While SB 1047 will not come to pass, there are a host of other AI regulations in California that emphasize transparency, fairness and safety, requiring businesses to disclose their use of AI, conduct impact assessments and meet stringent privacy and nondiscrimination standards.
California’s AI regulations to increase accountability
Among the goals of the proposed AI regulations is to ensure that businesses disclose the use of AI to consumers and take action to limit discrimination by AI tools.
Several laws have been proposed to increase business accountability and combat discrimination, as well as regulate how businesses use data, including:
- AB 2930: AB 2930 aims to prohibit the use of algorithms that can put people at a disadvantage based on their gender, race or sexual orientation. Under the act, developers and deployers are required to perform impact assessments, notifying subjects of consequential decisions.
- AB 3204: Under AB 3204, any business that uses personal information to train AI would be required to register with the California Privacy Protection Agency (CPPA). The act has the potential to introduce new oversight and registration requirements from the CPPA.
- SB 892: Under SB 892, businesses that provide AI services to California may need to meet privacy, nondiscrimination and safety standards, including a review and overhaul of AI systems so that they comply with AI risk management standards.
- SB 896: The California AI Accountability Act, introduced as SB 896, state agencies that use generative AI must disclose it to users. Any businesses involved in generating AI solutions or services to state agencies may have to adjust their services and provide clear disclosure and compliance with risk evaluation requirements.
California’s AI regulations for specific industries
California’s proposed AI regulations occasionally cover certain industries, such as the medical field, the entertainment industry and more.
- The Physicians Make Decisions Act (SB 1120) would require health insurers and healthcare service plans to ensure that licensed physicians supervise AI decision-making tools, when insurers use those tools to approve, modify or deny provider requests.
- AB 2602, which is one of two California measures the Screen Actors Guild-American Federation of Television and Radio Artists (SAG-AFTRA) helped to draft, would enhance the control workers have over the use of their digital images. For an agreement involving AI-generated likenesses to be legally binding, the workers must give their informed consent and would need to be represented by a legal counsel or their union.
- Several proposed regulations would impact the education field, including AB 801 which requires online services to delete student information upon request and AB 1824 and SB 970, which require disclosure of AI-generated content and generative-AI technology warnings, respectively.
- AB 2286 (formerly AB 316) is a bill co-sponsored by the Teamsters that will mandate human oversight of driver-less trucks.
How to strengthen a culture of AI readiness in California and beyond
While sweeping legislation like Europe’s AI Act may be delayed in California, it is coming at some point. To that end, organizations should start now to ensure they represent the principles of ethical and responsible AI use:
These tips can help you get started:
- Get (and stay) up to speed: Technology is changing fast, and it’s up to your board to stay caught up. An AI ethics certification course can provide the background you need to govern AI responsibly while continuing education ensures your board stays up to date on new advancements.
- Make AI part of risk management: Risk management software allows you to keep track of threats and make effective decisions about where to focus your resources.
- Get in the habit of notifying: Many of the proposed regulations require businesses to notify consumers about the use of AI. Be proactive and start notifying your clients and customers, as well as employees or anyone else who uses your services, if and when you use AI.
California’s AI regulations are just the beginning
As California continues to pave the way with its forward-thinking AI regulations, staying informed and prepared is more crucial than ever for businesses across the globe. The landscape of AI regulation is complex, making it essential to have access to the most current and comprehensive information.
Download our guide that details the latest global regulatory trends — including AI — and offers valuable insights to help anticipate developments in AI compliance in California and beyond.
