California Focuses on AI-Driven Workforce Change and Potential Layoff Rule Updates

California has issued a new executive order directing State agencies to assess how artificial intelligence (AI) may be impacting employment trends, including job displacement, workforce transitions, and reskilling needs. While this directive applies primarily to state agencies, it reflects a broader policy focus that may eventually shape future labor regulations affecting private employers with California-based employees. 

At this time, there are no new compliance obligations for private employers. However, the order is an important indicator that California is actively evaluating whether existing labor laws are sufficient to address AI-related workforce disruption, including potential changes to layoff notification and reporting requirements. 

What the Executive Order Directs State Agencies to Do 

The executive order directs California state agencies to begin preparing for potential AI-driven workforce disruption. Key actions include: 

• Tracking AI’s impact on employment through new reporting tools, including a statewide dashboard, labor market analysis, and a report identifying early warning signs of job displacement. Agencies are also asked to evaluate possible updates to California’s WARN Act.  

• Supporting workers in an AI economy by expanding job training, exploring employee ownership and wealth-building models, and helping small businesses adopt new technologies.  

• Strengthening workforce safety nets by reviewing unemployment insurance, severance practices, and retraining programs, and improving access to public benefits and job transition services.  

Overview of the Federal WARN Act 

The federal Worker Adjustment and Retraining Notification (WARN) Act requires covered employers to provide advance notice before certain mass layoffs or plant closures. Under federal WARN: 

• Covered employers generally include those with 100 or more full-time employees  

• Employers must provide 60 days’ written notice in advance of:  

  • Plant closings affecting 50 or more employees at a single site, or  

  • Mass layoffs affecting 500 or more employees, or  

  • Smaller layoffs involving at least 50 employees if they represent 33% of the workforce at a site  

Notice must be provided to affected employees, state dislocated worker units, and local government officials  

California maintains its own version of WARN that is generally broader and more employee-protective than federal requirements. Key differences under Cal-WARN include: 

• Applies to employers with 75 or more employees, including part-time workers  

• Requires 60 days’ notice, similar to federal WARN  

• Covers:  

  • Plant closures  

  • Mass layoffs affecting 50 or more employees (regardless of percentage of workforce)  

  • Relocations of an employer’s operations that affect employee roles within California  

While the executive order does not change existing WARN requirements, it signals that California is increasing its focus on AI-driven workforce disruption and evaluating whether current notices—particularly layoff notice requirements and transition protections are sufficient in an AI-driven economy.