SHRM Opposes California Bill Restricting AI Tools in HR

In a March 31 letter addressed to the California State Assembly, SHRM expressed its opposition to Assembly Bill 1018, a piece of legislation that would significantly regulate decision-making tools powered by artificial intelligence. SHRM voiced its concern that the proposed level of restriction would “chill the ongoing use and adoption of AI in California,” with the result that businesses in the state would struggle to compete in the global market. Notably, SHRM did not support the unrestricted use of AI but advocated for “promoting thoughtful regulation of artificial intelligence and automated decision systems (ADS).” 

With 30,000 members in California, SHRM has a vested interest in ensuring that HR professionals in the state benefit from “a balanced approach” that will enable “businesses to use tools that will lead to better workforce decisions.” SHRM said that AB 1018 does not accomplish this objective. 

AI Benefits for Employers and Workers

According to SHRM research, 26% of organizations have adopted AI to support HR-related activities. The majority of these have implemented AI within the last year, reflecting the HR profession’s embrace of AI used to “enhance their organizations’ capabilities because it offers a promising array of solutions to address complex demands of the modern workplace.” A 2024 SHRM survey revealed that the majority of HR leaders using generative AI (GenAI) found that it boosted efficiency and improved work quality.  

With AI reshaping the business landscape, there is also pressure to reskill or upskill workers. California employees must be able to learn, adapt, and use AI tools to remain competitive in the job market. 

HR professionals are already reaping the benefits of AI, according to SHRM research. Of those using AI, 64% of employers used it to support recruiting, interviewing, and hiring processes. There is also evidence that AI is improving diversity in the workplace. By reducing algorithmic discrimination, AI has resulted in candidates who are more diverse in terms of race, education, and gender, according to the majority of surveyed organizations. 

But that is only a part of the larger picture. “The opportunities AI presents are limitless,” said SHRM President and Chief Executive Officer Johnny C. Taylor, Jr., SHRM-SCP. When combined with human creativity, “this synergy has the capacity to transform your organization while maximizing human potential.” The goal, according to SHRM, is to blend AI with human intelligence (HI) and oversight to achieve the best outcomes. 

Flaws in the Bill 

As it stands, AB 1018 would prevent California companies from using AI to solve problems. According to SHRM, part of the issue is the bill’s overly broad definition of ADS as any “computational process derived from machine learning” that would “replace human discretionary decision-making.” 

This definition potentially covers all HR technology tools, interfering with the way HR has been combining AI with HI. Modern HR relies heavily on these tools, which include applicant tracking systems, performance management platforms, and scheduling software. It is important to note that these tools only advise, rather than replace, human judgment. 

The bill is also not clear about which HR technologies would be affected. For instance, would traditional technologies using data analytics be regulated? Confusion regarding the scope of the bill places a major regulatory burden on companies’ HR operations. 

Similarly, by requiring performance evaluations and third-party audits without clear standards for implementation, AB 1018 would result in huge compliance costs. Because of the bill’s broad definition of ADS, companies may feel compelled to perform evaluations and audits on almost every HR application and tool that employs machine learning or data analytics. That is a wide range of systems, from basic applicant tracking software to performance management platforms.  

SHRM is committed to preventing unlawful bias in employment decisions but is concerned that AB 1018 would overburden employers with compliance requirements rather than achieve this goal. It is better, SHRM said, that employers evaluate their own systems, when necessary, based on context. A blanket audit requirement would only discourage business innovation, something that has long benefited the state of California. 

AB 1018’s regulations would apply to any AI technology that is used to make “consequential decisions.” Further, it would require HR professionals to disclose the use of ADS to subjects of those consequential decisions, in addition to giving them the choice to opt out of ADS use entirely. Based on the bill’s specifics, HR would be required to disclose “key parameters known to disproportionately affect the outcome” of a decision. This might involve revealing scoring methodologies, performance metrics, or assessment frameworks that would harm an employer’s ability to make complete, nuanced evaluations. 

The opt-out provision could also result in complex parallel processes for different categories of workers. This situation would adversely impact small and midsize employers that lack the resources to establish and sustain these processes. It would be simpler for these employers to simply forgo the use of AI tools, placing them at a competitive disadvantage. 

AI + HI = ROI 

AI offers significant benefits to California businesses. These include increased productivity, the creation of high-skill job opportunities, improved decision-making, and tools to reduce unintended bias.  

SHRM believes that the way forward for businesses is to combine AI with human intelligence and oversight. SHRM’s Taylor summarized the association’s position thus: “AI + HI = ROI.” The bill is not an accurate reflection of the modern HR practice, ignoring the ways HR professionals thoughtfully integrate AI technology into their human decision-making processes, SHRM wrote. 

Rachel Zheliabovskii is a specialist, B2C content, at SHRM.