California is moving quickly to confront the rise of artificial intelligence (AI) in the workplace, with lawmakers weighing bills that would regulate AI in the workplace, but cost concerns may decide whether they move forward.

A centerpiece of the legislative push, Senate Bill 7 would require employers to give workers 30 days’ notice before deploying AI systems in the workplace. Covered uses include decisions about hiring, compensation, promotion, or termination.

The bill also gives workers the right to appeal AI-driven employment decisions, while banning predictions based on immigration status, ancestry, health data, or psychological state.

A recent audit of algorithmic management tools found that many are already used to determine pay — a trend that began among gig workers nearly a decade ago and is now becoming widespread. Tests have shown that AI resume screeners can disqualify or downgrade applicants for arbitrary reasons such as race, sex, or even for wearing glasses.

The legislation would also prohibit inferences drawn from brain data, which could reveal highly sensitive information such as a person’s health or even the words and images they are thinking of. Lorena Gonzalez, president of the California Federation of Labor Unions, told CalMatters that employers shouldn’t be allowed to predict if you’re pregnant or what you think about your employer or boss and use that information against you.

SB 7 is backed by the California Federation of Labor Unions, AFL-CIO, which represents more than two million workers statewide. The federation contributed more than $2.1 million in political donations to state lawmakers last year, according to the CalMatters Digital Democracy database.

Beyond SB 7, two related bills aim to tighten rules around workplace surveillance and high-risk AI tools:

Together, AB 1331 and AB 1221 aim to shield workers from overly intrusive surveillance while introducing stricter transparency and accountability standards around how AI and automated tools are deployed in California workplaces.

Separately, Assembly Bill 1018 (AB 1018), authored by Assemblymember Rebecca Bauer-Kahan, would require testing before deployment of automated decision-making systems used in areas such as employment, housing, education, health care, financial services, and criminal justice. AB 1018 would also grant workers the right to appeal AI decisions within 30 days.

Gonzalez argued that AI surveillance in the workplace should face strict limits.

“We have to set up guardrails against every kind of surveillance and AI tool to ensure that workers have the privacy and respect and autonomy that they deserve,” Gonzalez said.

Sen. Jerry McNerney, author of SB 7, warned of a “race” to adopt AI in ways that could displace workers.

“There’s tremendous opportunity for productivity, for making people more comfortable and safe, but your imagination can run wild with what can go wrong here,” McNerney said at a recent CalMatters event.

While the worker protection bills are advancing, cost estimates pose a major hurdle.

Senate Bill 7 is already on the Legislature’s suspense calendar, a little-known but powerful process used by the Assembly and Senate Appropriations Committees. Each year, hundreds of bills with a projected price tag above $50,000 are placed on the calendar for closed-door deliberations. Committees can then advance bills, hold them as “too expensive,” or amend them. Roughly two-thirds of bills typically survive, but critics argue the lack of transparency makes the process undemocratic.

An Assembly Appropriations Committee analysis estimated that enforcing SB 7 could cost the state $600,000 or more, while the compliance costs for state agencies remain unknown, since the state does not track how many automated systems are currently in use.

In contrast, Assembly Bill 1018 is still under review by the Senate Appropriations Committee, which will decide whether to move it forward and potentially place it on the suspense calendar. Committee staff have estimated the measure could cost hundreds of millions of dollars if enacted, covering local agencies, state agencies, and the judiciary.

Facing criticism over costs, Sen. Jerry McNerney has pledged to amend SB 7 to reduce its fiscal impact. In a statement to CalMatters, he said he plans to remove the bill’s appeals process for workers — one of the most expensive provisions, but also a major point of contention between labor unions and business groups.

Assemblymember Rebecca Bauer-Kahan, who authored AB 1018, said she also intends to address cost concerns without gutting the bill. “I will admit to being surprised by the Senate Appropriations estimates, considering CalMatters’ prior reporting that automated decision-making systems use was not widespread at the state level. So I’m working to better understand the cost estimates so I can respond to them appropriately,” she told CalMatters.

Together, the two measures highlight the tension between protecting workers from AI and managing the high price tag of enforcement.

California business groups and major employers have voiced opposition to both SB 7 and AB 1018. Nearly 80 companies and associations — including Kaiser Permanente, Blue Shield of California, Bumble, Genentech, and Pfizer — have warned that compliance costs could drive up prices and slow innovation.

This year’s opposition follows similar resistance to an earlier version of AB 1018, which was pulled last year by Assemblymember Rebecca Bauer-Kahan after amendments narrowed it to focus only on employment. That proposal drew pushback from big tech firms and nearly 100 other companies across industries, ranging from health care and biotech to consumer apps.

The California Hospital Association and California Life Sciences argue that new rules could raise health care costs for patients. The California Credit Union League warned of negative effects on financial services.

Peter Leroe-Muñoz, general counsel of the Silicon Valley Leadership Group, said the organization supports responsible AI innovation. Still, he warned that the expenses tied to AB 1018 — including audits, training, staffing, disclosures, data retention, and potential lawsuits — could ultimately undermine many services that businesses currently provide at a reasonable cost.

“That becomes an additional financial burden in this more uncertain time that really becomes a drag on innovation, a higher cost not only for businesses and consumers but counties and other local municipal governments,” he said.

The authors of the bills are not newcomers to AI policy. Sen. Jerry McNerney previously helped lead an AI-focused subcommittee in Congress, giving him direct experience shaping national debates on the technology. Assemblymember Rebecca Bauer-Kahan, who chairs the Assembly Privacy and Consumer Protection Committee, has emerged as one of California’s most influential voices on digital policy. She was also among the first state lawmakers in the country to try to bring the Biden administration’s AI Bill of Rights into state law.

California’s regulatory agencies are also divided over how to handle AI. The California Privacy Protection Agency recently scaled back its own rules on automated decision-making after pressure from legislators and Gov. Gavin Newsom, citing compliance costs for businesses. Meanwhile, the California Civil Rights Department finalized a separate set of rules that ban discriminatory use of AI in recruitment, hiring, and promotion. Those protections are scheduled to take effect in October.

Underlying these efforts is a principle advanced in the Biden AI Bill of Rights — that people should be told when AI systems make important decisions about their lives, and should have a way to challenge those decisions if they believe the system made a mistake.

A new survey by TechEquity of 1,400 California adults found:

Veena Dubal, a coauthor of the study and an outspoken critic of AI systems that harm workers, said requiring employers to notify employees when AI is used is only a first step. Because most people don’t realize these systems are already operating in workplaces today, she argued that greater transparency could raise public awareness and eventually lead to banning algorithms that determine worker pay.

Dubal also pushed back on arguments that compliance costs are too high, warning that AI is already shaping wages in ways that shift hidden costs onto taxpayers. She noted that algorithms can be used to identify union organizers, enable discrimination, or even terminate employees managers choose to target.

“Workers, voters, taxpayers, we should all have a say in the kind of world that these companies are creating with the disproportionate power that they hold,” Dubal said.

Q: What is Senate Bill 7 (SB 7)?
A: SB 7 would require employers to notify workers before using AI in employment decisions, prohibit certain predictions, and initially included a right to appeal.

Q: What is Assembly Bill 1018 (AB 1018)?
A: AB 1018 would mandate testing of high-risk automated systems in employment, housing, health care, and more, with a 30-day appeals right for affected individuals.

Q: Why are costs such a challenge for these bills?
A: Enforcing SB 7 could cost at least $600,000, while AB 1018 could run into the hundreds of millions, according to legislative staff analyses.

Q: Who supports these bills?
A: The California Federation of Labor Unions, AFL-CIO, and lawmakers such as Sen. Jerry McNerney and Assemblymember Rebecca Bauer-Kahan strongly support them.

Q: Who opposes these bills?
A: Opposition includes the California Chamber of Commerce, Kaiser Permanente, Blue Shield of California, and nearly 80 other business groups and associations.

California’s attempt to regulate AI in the workplace pits worker protections against concerns about enforcement costs and business innovation. With major bills such as SB 7 and AB 1018 under scrutiny, their survival depends on whether lawmakers prioritize labor rights or cost control.

At stake is more than just fiscal discipline. The ability for workers to appeal an AI-driven decision or to be free from constant surveillance goes to the heart of constitutional and ethical principles. For unions and advocates, those rights are not luxuries but basic protections against unfair treatment.

The question is not whether California can afford to protect workers, but how to design policies that are both effective and sustainable. Lawmakers have an opportunity to show that fiscal discipline and workplace fairness are not mutually exclusive. Finding that middle ground — instead of defaulting to polarized choices — could help California set a national example of how to regulate AI responsibly.

The outcome will determine whether California continues to position itself as a leader in balancing AI regulation with fiscal responsibility, or whether political divisiveness will stall momentum. For workers, unions, and businesses alike, the decisions made in the coming weeks will help define the role of AI in California workplaces for years to come.

Editor’s Note: This article was created by Alicia Shapiro, CMO of AiNews.com, with writing, image, and idea-generation support from ChatGPT, an AI assistant. However, the final perspective and editorial choices are solely Alicia Shapiro’s. Special thanks to ChatGPT for assistance with research and editorial support in crafting this article.