As artificial intelligence continues to transform the workplace, California is taking steps to better understand, and potentially regulate, the impact of AI on workers.
In response to growing concerns about AI-related job displacement, California Governor Gavin Newsom recently issued Executive Order N-6-26 (the “Order”). According to the Governor’s office, the Order is intended to balance innovation with worker protections by studying how AI may affect employment and identifying potential strategies to mitigate workforce disruption.
While the Order does not impose new obligations on private employers, it signals the direction California policymakers may take in future legislation and regulation. Employers that are implementing AI tools or considering workforce restructuring should pay close attention.
What Does the Executive Order Do?
The Order directs multiple California agencies including the Employment Development Department (EDD) and Labor and Workforce Development Agency (LWDA), and other stakeholders to study the effects of AI and technological innovation on employment over the coming months.
The focus is not on regulating AI technology itself. Instead, the Order is largely concerned with understanding how AI affects workers and whether additional protections may be necessary.
Areas of study include:
- Potential revisions to California's Worker Adjustment and Retraining Notification (CalWARN) Act to improve visibility into emerging workforce trends;
- The relationship between technology adoption and hiring, staffing, and workforce decisions;
- The development of public reporting and dashboards tracking AI's impact on employment;
- Potential severance, retraining, upskilling, and subsidized employment programs for displaced workers; and
- Alternative workforce models and approaches to supporting workers affected by technological change.
Several state agencies are expected to issue reports and recommendations over the next several months that could serve as the foundation for future legislation.
Why Does the Order Matter to Employers?
The significance of the Order lies less in its immediate legal effect and more in what it suggests about California's policy priorities.
The Order treats AI-driven workforce disruption as a labor and employment issue rather than solely a technology issue. Throughout the Order, there is an emphasis on worker protections, employee participation, retraining opportunities, and the role of collective bargaining in addressing technological change.
This approach may influence future legislative efforts involving:
- Employee notification requirements;
- Disclosure obligations regarding AI adoption;
- Retraining and redeployment programs;
- Severance obligations;
- Workforce impact assessments; and
- Additional protections for employees whose positions are affected by automation.
For employers, the Order may be an early indication that California is moving toward greater transparency and accountability regarding AI-related workforce decisions.
Does the Order Change Existing Labor Law?
No. The Order does not expand collective bargaining obligations or alter existing labor laws.
Private-sector labor relations remain governed primarily by the federal National Labor Relations Act (NLRA), which determines mandatory subjects of bargaining. California cannot independently expand those bargaining obligations for employers covered by the NLRA.
That said, the Order expressly highlights the role collective bargaining agreements can play in addressing technological change and directs further study of how unions are responding to AI adoption. As a result, employers should expect labor organizations to continue focusing on AI-related workplace issues, including automation, job displacement, retraining, and workforce planning.
How Could This Affect Workforce Restructuring Decisions?
As scrutiny surrounding AI increases, employers may find that the reasons they provide for workforce reductions become increasingly important.
Future legislation could potentially distinguish between:
- Layoffs caused directly by automation;
- Workforce reductions resulting from productivity improvements;
- Restructuring tied to broader investments in AI technologies; and
- Traditional cost-reduction measures that are unrelated to automation.
As lawmakers and regulators seek to understand the impact of AI on employment, the way workforce decisions are characterized internally and externally may influence future compliance obligations.
Employers should therefore consider carefully how AI-related initiatives and workforce changes are documented and communicated.
What Should Employers Do Now?
Although the Order does not create immediate compliance requirements, employers should begin preparing for a regulatory environment that places greater emphasis on transparency and workforce impacts.
Employers should consider:
- Reviewing how AI technologies are being used throughout the organization;
- Evaluating whether AI adoption may affect staffing levels or job functions;
- Developing strategies for employee upskilling, reskilling, and redeployment;
- Carefully drafting internal and external communications regarding workforce restructuring decisions; and
- Monitoring legislative developments at both the state and federal levels.
Takeaway
Governor Newsom's Executive Order does not create new obligations for employers today. However, it provides a clear indication that California policymakers are increasingly focused on the workforce implications of artificial intelligence.
As AI adoption accelerates, employers should expect continued discussion regarding notice requirements, retraining programs, severance obligations, and other worker protections. Organizations that proactively evaluate their AI strategy and workforce planning efforts will be better positioned to navigate future regulatory developments.
For questions on this topic, contact us at Eanet, PC.