Employment Law & Data Privacy Risks Employers Face

Common Employer Pitfalls and Best Practices

On May 21, 2026, California Governor Gavin Newsom signed Executive Order N-6-26 —a sweeping directive aimed squarely at understanding, measuring, and managing the impact of AI on California’s labor market (the “EO”). The EO reflects significant concern about AI’s potential major impact on all sectors of California’s economy. Why This Order, and Why Now? The already rapid pace of deployment of workplace AI tools continues to accelerate. With this profound shift, the labor market is experiencing significant transformation as employers seek to unlock the substantial potential productivity gains associated with AI adoption.[1] AI is being cited by employers as the primary or sole reason for more than a quarter of recent layoffs.[2] California sits at the center of this transformation. But with no state legislation passed to specifically address the impact of AI deployment upon the labor market, the Governor has responded through executive action. This is not the first executive order on AI. A prior executive order, issued on March 30, 2026, directed the Executive Branch to ensure AI procurement and adoption protect civil rights, civil liberties, and privacy. The new EO builds on that foundation—but this time, the focus is on jobs. The Focus of the EO Is to Build a Response Framework The EO is primarily directive in nature, tasking state agencies with conducting reviews, producing reports, and developing recommendations within defined timeframes. Here are the most consequential elements for employers: WARN Act Modernization. Within 180 days, the Labor and Workforce Development Agency (LWDA) must review and provide recommendations on revisions and updates to the California Worker Adjustment and Retraining Notification (Cal-WARN) Act, in a manner that is responsive to and effectively provides early warning data on emerging industry trends. The Cal-WARN Act already imposes pre-layoff notice obligations on qualifying employers. A revision tailored to AI-driven workforce reductions could expand the scope of who is covered, shorten notice windows, or impose new reporting triggers. Safety Net Review for Retrenched Workers. Within 180 days, the LWDA must submit to the Governor a review of policies and practices that provide displaced workers with a safety net, including severance and other forms of compensation such as stock or other forms of equity, along with any recommendations for incorporating such policies or strengthening existing programs. This review will include a comparative analysis of practices in other countries—suggesting California may look to European models of worker protection as a potential template. This is particularly notable because , unlike California, the member states of the European Union do not generally recognize at-will employment, but instead regulate employers’ ability to discharge employees. Collective Bargaining and Worker Voice. No later than October 15, 2026, the LWDA, in consultation with labor organizations, employer groups, and relevant experts, must review how the collective bargaining process is incorporating and addressing new technologies such as AI, in ways tailored to the specific needs of workers and employers, including how worker voice is incorporated in the adoption of emerging technologies, to identify what can be learned from unionized workplaces. For employers in non-union environments, this review could foreshadow future legislative or regulatory requirements around employee consultation or consent before deploying AI tools in the workplace. We previously wrote about regulatory developments concerning the use of AI in employment decision-making here . An AI Employment Dashboard. The Employment Development Department (EDD) is directed to launch a dashboard showing AI’s impacts on employment across various sectors using Unemployment Insurance data within 90 days of the Order’s issuance. This will create publicly accessible, sector-by-sector data on AI-related job displacement—data that will almost certainly be relied upon in future policy and legislative debates. Incentive Structures for Public-Good AI. No later than October 15, 2026, the Government Operations Agency must provide the Governor with options and recommendations for actions that could alter incentive structures and increase the likelihood of AI development and deployments that advance the public good, including potentially mandatory programs that direct a portion of revenue generated by AI companies to support beneficial deployments. A revenue-sharing mandate directed at AI companies would be unprecedented and would have significant implications for how AI firms structure their California operations. Reading the Signals California already has robust worker protection laws that apply to firms adopting emerging technologies. But with this EO, the Governor’s message is that these existing tools may not be sufficient for the pace and scale of AI disruption. Amendments are coming. This EO reflects a broader national and global trend. States and federal agencies alike are wrestling with how to regulate AI’s labor market effects. California’s actions often presage federal legislative activity and serve as models for other states. What California does today, others do tomorrow. The EO sets in motion a series of agency reviews and recommendations that will almost certainly become the foundation for new legislation and regulations in 2027 and beyond. Keeping up to date on the latest legal developments in the AI space will continue to be a top priority for California employers. FOOTNOTES [1] Davenport, Thomas & Srinivasan, Laks, “Companies Are Laying Off Workers Because of AI’s Potential, Not Its Performance,” Harvard Business Review, January 2026, https://hbr.org/2026/01/companies-are-laying-off-workers-because-of-ais-potential-not-its-performance . [2] “Challenger Report: April Job Cuts Rise 38% from March; YTD Cuts Down 50%,” Challenger, Gray & Christmas, May 7, 2026, https://www.challengergray.com/blog/challenger-report-april-job-cuts-rise-38-from-march-ytd-cuts-down-50/ .

Most employment lawsuits don’t start with dramatic misconduct or bad actors. They start with small, avoidable decisions that no one thought would matter—until they did. In my experience representing employers, the practices that cause the most damage are rarely exotic or cutting‑edge. They’re the routine, “we’ll get to it later” items: missing documentation, inconsistent discipline, outdated policies, or decisions made out of frustration instead of process. Employment law rewards preparation and punishes procrastination. The difference between a defensible workplace decision and an expensive lawsuit is often just a few steps that were skipped when things felt busy or manageable. What follows are ten mistakes management‑side employment attorneys see over and over again—and that are far easier to prevent than to defend. Mistake #1: Treating documentation like a chore instead of a shield. In the world of employment law, if you didn’t write it down, it didn’t happen. I’ve seen too many cases lost because management never documented poor performance or gave glowing reviews to an underperforming employee. Here’s a good rule of thumb: if you’re going to take an adverse action against an employee, a stranger should be able to walk in off the street, only review your documentation, and tell you why it was necessary. Mistake #2: Letting things get personal. When a manager’s frustration starts driving employment decisions, you’re headed for trouble. For example, if an employee corrects the behavior they were disciplined for and you fire them anyway without any justification, it’s going to look suspicious. Bring in another supervisor who can evaluate the situation objectively. Mistake #3: Inconsistency in how you treat employees. If I could give employers one piece of advice, it’s this: be consistent. If it’s fine for your favorite employee to come in late three times a week, you can’t fire someone else for the same thing. If you’re absolutely convinced it’s appropriate to treat an employee differently, you had better document that very carefully in writing and make sure you’ve got a policy to back it up. Mistake #4: Neglecting your handbook and policies. Think of your employee handbook as an insurance policy: it sets expectations, communicates standards, and takes away the “I had no idea” defense from employees who violate them. But it’s a double-edged sword—you need to know what’s in it and actually follow it, because a plaintiff’s lawyer will absolutely point to your own policies and ask why you didn’t. Review it annually and don’t be one of those employers whose handbook hasn’t been updated since the Clinton administration. Mistake #5: Retaliating (even when you don’t think you are). Anti-retaliation provisions are baked into virtually every discrimination law as well as many other laws. The sooner you take an adverse action after someone complains, the more it looks like retaliation. I’ve seen managers get fed up with chronic complainers, and it resulted in a huge liability for the employer. If someone has recently complained and needs to be seriously disciplined or terminated, bring in a decision-maker who has no knowledge of the complaint and let them call the shot. Mistake #6: Botching the interactive process under the Americans with Disabilities Act (ADA). When someone asks for an accommodation, the employer is generally in the driver’s seat when it comes to determining what’s reasonable, but the employer has to engage in the interactive process. The interactive process is not a one-way suggestion box—it’s more like couples counseling: if only one party shows up, nobody gets better. When an employee requests an accommodation, request appropriate medical documentation explaining how their specific limitations impact their specific job duties, and ask how long they’ll need the accommodation. If they don’t respond, follow up in writing. That paper trail will be your best friend when the employee claims you failed to accommodate them. Mistake #7: Misclassifying employees under wage and hour laws. Wage and hour law is one of those areas where employers get into trouble because they assume the answer is simpler than it actually is. Whether it’s classifying someone as exempt based on their title instead of their actual duties, or assuming a worker is an independent contractor when the law says otherwise, the consequences of getting it wrong include liability for unpaid wages, double damages, and attorneys’ fees—and it adds up fast when multiple employees are affected. Mistake #8: Ignoring the value of a good investigation. I know of an organization that tried to handle serious misconduct allegations with inexperienced consultants. It was a disaster—they ended up commissioning another investigation (with an experienced law firm) into why the first one went so poorly. Investigating sensitive workplace situations is like surgery: it’s generally not advisable to perform it on yourself. When serious allegations arise, bring in outside counsel with investigative experience. Mistake #9: Assuming “at-will” means “bulletproof.” I hear this all the time: “We’re an at-will state, so we can fire anyone for any reason.” You can fire an employee for any lawful There’s a complex web of state and federal protections you might not be thinking about. At-will employment is not a force field against discrimination, retaliation, or wrongful termination claims. Mistake #10: Waiting too long to call an employment lawyer. I know this sounds self-serving, but hear me out. I’ve seen too many HR professionals reach out to a general business attorney who mostly does real estate or contracts. That’s like suspecting you’re having a stroke and going to your family practitioner for a checkup. The half-hour you spend talking to an employment lawyer is a lot cheaper than the half-a-million dollars that can be spent on litigation. If your gut says you’ve got an employment law-specific problem, listen to it and call someone who practices in that area. Most of these mistakes come down to documentation, consistency, and early intervention. The longer you let things fester, the harder they are to fix—and the more expensive they become. Think of it this way: nobody ever called their employment lawyer and said, “I wish I’d waited longer to reach out.” If any of these hit close to home, give us a call. We’re happy to help you get ahead of the problem before it gets ahead of you.

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