Illinois Now Regulates AI in Employment. What Does It Mean for a California Employer With a Remote Worker There?

Illinois Public Act 103-0804, also called HB 3773, has been in effect since January 1, 2026. It bars AI use that has a discriminatory effect on a protected class, bars ZIP codes as a stand-in for protected classes, and requires notice when AI influences hiring, discipline and similar decisions. The state’s detailed notice rules were proposed and then withdrawn, so the statute applies without them.

I am Mac Malbrough. I hold a J.D. and an MS-HRM, I am not an attorney, and I write for California employers. My earlier pieces cover California’s own rules and the job seeker’s side of Illinois’s older video interview law. This one is for the California company that hired a salesperson in Chicago or lets a developer work from Peoria, and wonders whether another state’s AI law followed them there.

What does Illinois’s AI employment law require?

The act, signed on August 9, 2024, amends the Illinois Human Rights Act. As summarized by Duane Morris and DLA Piper, it does three things:

• Bars discriminatory effect. An employer may not use AI that has the effect of discriminating against employees based on a protected class. The test turns on results, not on intent.
• Bars ZIP codes as a proxy. An employer may not use ZIP codes as a stand-in for protected classes.
• Requires notice. An employer must tell employees when it uses AI for recruitment, hiring, promotion, renewal of employment, selection for training or apprenticeship, discharge, discipline, tenure, or the terms, privileges or conditions of employment.

The definition of AI is broad. It covers a machine-based system that infers from its inputs how to generate outputs such as predictions, content, recommendations or decisions, and it includes generative AI. A resume ranker counts. So does a chatbot that screens candidates and a scheduling tool that decides who gets promoted shifts.

What happened to the Illinois notice rules?

The statute left the details to the Illinois Department of Human Rights, and the agency moved in 2026, then stopped. According to BakerHostetler, the department proposed rules on May 15, 2026, set a hearing for June 10, and then withdrew the proposal on June 2. A September 21, 2026 update from Bright Defense reports that no revised timeline had been published.

The withdrawn draft is still a useful guide to what regulators expect. It would have required a plain-language notice that names the AI system, the positions it applies to and the decisions it influences. It would also have explained what personal data the system analyzes and why, and given a contact for questions or accommodation requests. Applicants would have received the notice in the job posting. Current employees would have received it in the handbook and in a conspicuous place on the website, annually and within 30 days of adopting a new system. None of that is law today. All of it is a reasonable way to give the notice the statute already requires.

Does it reach a California employer with one remote worker in Illinois?

I do not know, and neither do the summaries I read. None of them says how the Illinois Human Rights Act defines an employer for a company based in California whose only Illinois presence is a remote employee. That is a question for an Illinois employment lawyer, and I would not treat “we are a California company” as a safe answer. Until someone who practices there answers it, plan as if the law could apply.

The practical approach is to assume the law could apply and build one process that satisfies both states. The California Civil Rights Council’s regulations on automated-decision systems, effective October 1, 2025, already reach employers with five or more employees, and they require four years of records. If you inventory your tools, test them for discriminatory effect and keep records for California, adding an Illinois notice is a small extra step. My piece on the California rules for AI hiring tools covers that foundation.

How do you test for a ZIP code proxy?

You do not need a data scientist to start. You need the list of people who applied, their ZIP codes, and which ones your tool advanced. Group ZIP codes by something you can defend, such as the share of residents in a protected group using Census data, then compare how often each group advanced.

Here is a hypothetical. Suppose 100 applicants came from ZIP codes in the first group and 40 advanced, a 40% rate. In the second group 100 applied and 24 advanced, a 24% rate. Dividing 24 by 40 gives a ratio of 0.60. The federal Uniform Guidelines treat a selection rate below four-fifths of the highest group’s rate, or 0.80, as generally regarded as evidence of adverse impact. A ratio of 0.60 is a flag to investigate, not proof of discrimination. Ask the vendor whether location is an input, remove it if it is, and run the test again.

The same pattern is why the ZIP code ban exists. A neighborhood often tells a model more about race or income than the applicant ever said. I tell my own version of that story in The anomaly trap.

How long should you keep AI hiring records?

The sources I read disagree on Illinois. Some law firm summaries describe a four-year retention period, others three. The Bright Defense update recommends keeping records until any related charge is resolved. For a California employer the answer is simpler: the Civil Rights Council’s regulations already require four years, and keeping the same records for the same period under both states avoids a conflict. Keep the notices you sent, the inventory of tools, any testing results, the vendor’s documentation, and the applications and decisions the tools touched.

How do you build one process for both states?

1. Inventory your tools. List every system that screens, ranks, schedules, scores or monitors people: the applicant tracking system, the video interview tool, the scheduling app, the performance dashboard.
2. Map your people. Note which employees and applicants live in Illinois. Remote hires change the map every quarter.
3. Write one notice. Name each tool, the decisions it influences, the data it uses, and a person to contact. Put it in job postings, the handbook and on the careers page.
4. Ask each vendor for a letter. It should say whether the tool uses location data, how the vendor tests for adverse impact, and what records it keeps.
5. Add a human step. A named person reviews every rejection or discipline recommendation a tool makes before it is final.

What could a plain-language notice say today?

No agency form exists, so write your own and keep it short. Here is a version you can adapt, using the elements of the withdrawn draft:

“We use the following tools that rely on artificial intelligence: [name each tool]. They are used for [recruiting, scheduling, performance review or the actual purpose]. They look at [the information the tool receives, such as the application, the resume or schedule history]. A person reviews every recommendation before a decision is final. To ask a question, request an accommodation or ask about a decision, contact [name, email and phone].”

Replace each bracket with facts before it goes live. Do not overstate the human review. If a person only skims the tool’s output, say so honestly to yourself and fix the process before you promise it in writing. The notice becomes evidence of what you told people, and a notice that claims more oversight than exists is worse than none.

How does Illinois differ from California?

The two states aim at the same harm by different routes. California’s regulations apply existing anti-discrimination law to automated-decision systems and add a four-year record rule. Illinois amended its Human Rights Act to name AI, add a ZIP code ban and require notice. Illinois also has the older Artificial Intelligence Video Interview Act, which requires notice, an explanation and consent before AI analyzes a recorded interview, and I cover that from the applicant’s side in my guide to your rights when AI screens your application. If you hire in both states, treat the stricter requirement in each category as the standard for everyone, since running two versions of a tool is harder than running one careful one.

What should you do this week?

Find out whether you have any employee or applicant in Illinois, and if you do, send the question about the definition of employer to an Illinois lawyer. At the same time, start the tool inventory in step one. Then check one tool’s ZIP code use with the four-fifths test above.

A structured interview scorecard gives a person something consistent to review next to an AI score, and mine are in the structured interview scorecards. If you want me to walk through your tools, start with the HR compliance check-up.

Sources

• Duane Morris, Illinois enacts AI law focused on employment practices, August 2024, read October 31, 2026
• DLA Piper, Illinois becomes second state to enact AI law for employers, 2024, read October 31, 2026
• BakerHostetler, Illinois proposes specific notice requirements, 2026, read October 31, 2026
• Bright Defense, Illinois AI hiring law takes effect without final employer rules, updated September 21, 2026
• 29 CFR 1607.4, Uniform Guidelines, information on impact
• California Civil Rights Council, automated-decision system regulations, June 30, 2025

McKinley holds a J.D. but is not a licensed attorney. Articles here are general information, not legal advice. For your specific situation, talk with an employment attorney.

Data current as of October 2026. Sources are linked where each figure appears.