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Compliance & Ethics
Elizabeth Gidez Image
Elizabeth Gidez
Associate General Counsel

What California’s AI regulations mean for your company

July 5, 2024
0 min read
The general counsel and CCO discussing the California AI regulation

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 California’s AI regulations are leading the way on American AI legislation.

In May 2024, the California legislature advanced dozens of AI measures, the New York Times reported. The regulations aim to protect jobs and consumers, yet industry insiders fear 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.

As is often the case that California laws set the precedent for the rest of the country, your company may need to comply with the regulations whether you’re based in the state or not. Read on to learn more about what the state’s legislature is proposing and what impact the potential laws may have on your business.

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 health care 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.
  • To help ensure AI benefits outweigh any risks, Senator Wiener has written a bill (SB 1047) that will require companies that build large AI models to perform safety testing. As stated on Senior Wiener’s website, its goal is to ‘ensure the safe development of large-scale artificial intelligence systems by establishing clear, predictable, common-sent safety standards for developers of the largest and most powerful AI systems.’
  • 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

California’s AI regulations are just proposals for right now, but once they become law, your company will need to act quickly and appropriately to ensure compliance. Even if some or many of the regulations fail to pass, they represent overall principles of ethical and responsible AI use, so being prepared to follow them is in your company’s best interest.

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.

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