California Is Preparing For AI’s Impact On Workers—Should Employers Be Preparing Too

Artificial intelligence (AI) has quickly evolved from an emerging technology into a tool that many employers use every day. Whether it is screening job applicants, drafting performance evaluations, summarizing workplace investigations, or assisting with policy development, AI is becoming increasingly integrated into business operations.

California policymakers have taken notice. Earlier this year, Governor Gavin Newsom issued an Executive Order directing state agencies to evaluate AI’s anticipated effects on California’s workforce and to develop strategies to prepare workers, employers, and government for those changes. While the Executive Order directs state agencies, it reflects a broader policy trend: California is actively preparing for a future in which AI will play a significant role in the workplace.

Although the Executive Order does not impose new legal obligations on employers, it provides a valuable reminder that organizations should begin evaluating how AI is being used within their organizations and whether appropriate policies and safeguards are in place.

AI Is Already Being Used by Employers

Generative artificial intelligence (AI) is increasingly becoming part of everyday workplace operations, including in the nonprofit sector. Employers are exploring and adopting AI tools to improve efficiency and assist employees with routine tasks such as researching and synthesizing information, drafting and editing documents, summarizing lengthy materials and meetings, preparing internal reports, and organizing and analyzing data. Recent employment data reflect the growing use of these technologies. Gallup reported that the percentage of U.S. employees using AI at work at least a few times a year nearly doubled between 2023 and 2025, increasing from 21% to 40%. Pew Research Center found that workers who use AI chatbots on the job commonly use them to research information, edit and draft written materials, and summarize documents or meetings.

These broader workplace trends are also relevant to nonprofit employers, where AI tools may be used for administrative, communications, fundraising, programmatic, and other organizational functions. As AI capabilities become increasingly integrated into commonly used workplace software, nonprofit employers should consider whether they have appropriate policies, employee training, and safeguards in place to address issues such as confidentiality, data security, accuracy, intellectual property, bias, and appropriate human oversight.

California’s Policy Direction Is Becoming Clear

The Governor’s Executive Order focuses on understanding AI’s potential impact on California workers, identifying occupations that may be affected, and developing strategies to help workers adapt to technological change. It also calls for collaboration among state agencies, educational institutions, labor organizations, and industry stakeholders.

While these initiatives do not directly regulate employers, they send a clear signal that California intends to remain at the forefront of AI governance. Employers should expect continued legislative, regulatory, and judicial developments addressing the use of AI in employment.

Indeed, California has already adopted regulations under the Fair Employment and Housing Act addressing the use of automated decision systems in employment decisions. As AI becomes more common in the workplace, employers should anticipate increased scrutiny regarding how these technologies are selected, implemented, and monitored.

Human Oversight Remains Essential

One of the most important principles for organizations is that AI should assist—not replace—human judgment.

AI-generated content can be remarkably persuasive while still containing factual inaccuracies, incomplete analysis, or fabricated citations. For that reason, any AI-generated work product should be carefully reviewed by an employee with appropriate subject matter expertise before it is relied upon for decision-making.

This is particularly important when AI is used to assist with:

• Personnel investigations;
• Disciplinary recommendations;
• Performance evaluations;
• Hiring decisions;
• Accommodation analyses; or
• Legal research.

Ultimately, employers—not software—remain responsible for employment decisions.

Consider Confidentiality Before Using AI

Nonprofits routinely handle confidential information, including personnel records, medical information, attorney-client communications, and sensitive investigative materials.

Before employees input information into any AI platform, organizations should understand:

• Whether the platform stores submitted information;
• Whether user data may be used to train future AI models;
• What contractual privacy protections exist;
• Whether the platform complies with applicable security requirements; and
• Whether employer policies permit the use of the platform for confidential work.

Even where an AI platform offers enterprise-level security, employees should exercise caution when handling sensitive information on such platforms and follow applicable employer policies.

Review Existing Policies

Many employers have not yet adopted formal AI policies. Nevertheless, employees may already be using publicly available AI tools, perhaps without management’s knowledge.

Now is an appropriate time to review existing policies and determine whether additional guidance is warranted.

An effective AI policy may address topics such as:

• Approved and prohibited AI tools and uses;
• Protection of confidential, proprietary, donor, employee, client, and beneficiary information;
• Required human review and verification of AI-generated work;
• Documentation and record-retention requirements;
• Compliance with applicable privacy, grant, contractual, and regulatory requirements;
• Intellectual property and ownership considerations;
• Vendor selection, contracting, and procurement considerations;
• Risks of bias or discrimination in AI-assisted decision-making; and
• Employee training on appropriate and responsible AI use.

Clear expectations can help ensure that AI is used responsibly and consistently across the organization.

Engage Labor Relations Early

For nonprofit employers with union-represented employees, the implementation of AI may raise collective bargaining considerations.

Depending on how AI is introduced and used, nonprofit employers may need to evaluate whether implementation affects terms and conditions of employment that are subject to bargaining, such as workload, job duties, staffing, performance expectations, or workplace monitoring.

Even where an employer retains discretion to adopt new technology, bargaining obligations may arise regarding the decision to implement AI or the effects of its implementation. Consulting labor relations professionals or legal counsel early in the planning process can help nonprofit employers identify and address potential bargaining obligations before implementation.

Preparing for What’s Next

AI technology is advancing rapidly, and California’s legal framework is evolving just as quickly. Rather than waiting for new legislation or litigation to define best practices, employers should begin preparing now.

Among other things, organizations should consider:

• Identifying where AI is currently being used across the organization;
• Evaluating potential legal, operational, privacy, and reputational risks;
• Developing and implementing appropriate AI governance policies;
• Training supervisors and employees on appropriate and responsible AI use;
• Reviewing AI vendor contracts, data-use practices, and privacy and security protections;
• Considering applicable grant, donor, contractual, and regulatory requirements; and
• Monitoring legal and regulatory developments affecting the use of AI in the workplace.

Looking Ahead

Artificial intelligence presents significant opportunities for California’s employers. Used thoughtfully, AI can improve efficiency, streamline administrative tasks, and allow employees to focus on higher-value work. At the same time, the technology raises important questions regarding privacy, bias, transparency, labor relations, and legal compliance.

Governor Newsom’s recent Executive Order underscores that California is actively planning for AI’s impact on the workforce. Employers will be well served by viewing it as an opportunity to assess their own AI practices. Organizations that establish thoughtful governance, maintain meaningful human oversight, and proactively address legal risks today will be better positioned to adapt as California’s regulatory landscape continues to evolve.