California Gov. Gavin Newsom signed an executive order last month directing multiple state agencies to study how AI is reshaping the labor market. Experts suggest this could lead to new layoff notice requirements, severance norms and AI hiring compliance standards for California employers. The order imposes no compliance obligations immediately, but it sets a 180-day clock on recommendations to revise the state's WARN Act.

Potential changes to WARN

This is Newsom's third order addressing AI, following a 2023 directive on AI safety and privacy and a March order on state government AI procurement. This one is the first to zero in on job displacement, arriving as California lawmakers separately consider Senate Bill 951.

The bill would amend the Cal-WARN Act to require 90 days' notice for AI- or automation-driven layoffs, 30 days more than standard WARN. It would also lower the trigger to just 25 workers or 25% of the workforce, well below the usual 50-employee threshold. Beyond notice, the bill would require employers to flag hiring freezes tied to AI and give affected workers a right to bid on other open positions.

According to the new executive order, the California Labor and Workforce Development Agency (LWDA) must also review severance practices, equity compensation and subsidized employment programs for displaced workers, including a comparative look at how other countries handle AI-related job loss. Connecticut and New York have already amended their WARN laws to require notice when layoffs stem from AI adoption, giving the LWDA outside models to draw on as it builds its recommendations.

In a brief, attorneys from Ogletree note that LWDA's 180‑day assignment is designed to make Cal‑WARN more responsive to AI‑driven workforce changes, potentially including lower thresholds or AI‑specific notification triggers.

To put the order into a broader perspective, there are several other factors that HR leaders should have in their sights:

  • Ogletree notes that the order's review of severance, equity and subsidized work programs, including comparisons to other countries, could lead to new California‑specific safety‑net protections for workers displaced by AI.
  • Separately, by Oct. 15, LWDA is required to study how union contracts are handling AI adoption and worker input, suggesting that collective bargaining obligations around new tech could face added scrutiny.
  • On the data side, the Employment Development Department must launch a public dashboard within 90 days to track AI's effects on employment by sector and report employer feedback on technology's role in hiring twice a year through 2027.
  • The order also reaffirms existing state protections against discrimination from automated decision-making tools in hiring, performance reviews and terminations. Employers using AI anywhere in the employment life cycle should treat this as a prompt to revisit those compliance frameworks now, not wait for new rules.
  • The order also directs the Governor's Office of Business and Economic Development to study barriers to employee ownership structures and ways workers might share in AI-driven productivity gains through equity. It's an early-stage idea, but one worth watching as a possible model for offsetting displacement concerns.

Employment attorneys at Ogletree describe the order as laying out an ambitious framework of reviews and reports that could underpin future legislative or regulatory proposals. With the LWDA's WARN Act recommendations due within 180 days, HR leaders should use this window to audit AI use in employment decisions and review WARN Act readiness before California's recommendations take shape.

(Photo credit: Di Studio/Adobe Stock)

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