The AI Law Every Employer Needs To Know About
Texas HB 1709 proposes comprehensive AI governance, focusing on fairness and accountability in AI-driven decisions like hiring. Effective September 2025, the bill requires employers to prepare their AI systems for new regulatory standards, particularly in background screening and employment processes.
Texas House Bill 1709 (HB 1709), introduced as the Texas Responsible Artificial Intelligence Governance Act, establishes one of the most comprehensive frameworks for regulating artificial intelligence (AI) systems in the United States. With a potential effective date of September 2025, the bill aims to balance innovation with fairness, transparency, and accountability, particularly as AI increasingly facilitates consequential decisions like hiring and employment background checks. Employers relying on AI should begin preparations now to align their systems and policies with these new requirements.
How Does Texas Define High-Risk AI?
HB 1709 introduces definitions that are critical to understanding the scope of its regulations. The bill focuses on high-risk AI systems that influence consequential decisions. Here’s what these terms mean within the framework:
A high-risk artificial intelligence system is one that significantly influences the outcome of consequential decisions. These systems are considered substantial factors in making determinations that affect access to critical opportunities like employment, healthcare, or financial services. For example, an AI-powered resume screening tool that evaluates candidates and recommends top applicants would fall under this category. However, certain tools, such as cybersecurity programs and fraud detection systems, are excluded unless they directly impact these consequential decisions.
The term substantial factor refers to an element that plays a pivotal role in decision-making. For an AI system to be deemed a substantial factor, it must influence the outcome of a decision in a meaningful way, weigh more heavily than other contributing factors, and significantly alter the decision’s result.
Finally, consequential decisions are defined as actions that materially or legally affect a person’s access to services or opportunities. These include decisions related to employment, financial services, and healthcare. The bill’s focus on these critical areas underscores the importance of ensuring fairness and transparency in AI-driven processes that can profoundly impact individuals.
These definitions emphasize the bill’s focus on AI systems that significantly impact individuals’ lives. With these definitions in mind, HB 1709 outlines several obligations for employers deploying high-risk AI systems.
What are the Bill’s Key Provisions?
Transparency and Disclosure Obligations
Employers must notify individuals impacted by high-risk AI systems, particularly in hiring decisions. Disclosures must include:
That AI is being used in the hiring process.
The purpose and factors considered by the AI system.
The extent of human oversight in decision-making.
Contact information for the AI system’s deployer.
Impact Assessments
Employers are required to conduct annual impact assessments for high-risk AI systems and update them within 90 days of significant modifications. These assessments must analyze risks of algorithmic discrimination, data usage, and system limitations to ensure compliance with transparency and fairness requirements.
Bias Mitigation Requirements
The bill requires employers and vendors to identify and mitigate risks of algorithmic discrimination, focusing on unlawful bias against protected classes under state or federal law. Employers must take reasonable care to prevent such discrimination and act promptly to address any issues.
Vendor Accountability
Developers and deployers of high-risk AI systems must provide employers with detailed reports, including:
Performance metrics on accuracy, transparency, and reliability.
Information about training data sources.
Measures to prevent bias and ensure governance.
What are the Potential Impacts on Employment Decisions?
HB 1709 introduces significant obligations for employers that rely on AI systems in hiring processes, emphasizing accountability and fairness while reducing the risks associated with AI-driven decision-making.
Employers will need to conduct thorough due diligence when selecting AI systems, ensuring their vendors meet HB 1709’s reporting and transparency standards. This includes verifying that vendors provide documentation such as performance metrics, bias mitigation measures, and training data details. Internally, employers must revise their policies to align with HB 1709’s requirements, including annual impact assessments and disclosure obligations.
The stakes for non-compliance are high. Employers face substantial penalties, with fines reaching up to $200,000 per violation if AI systems produce discriminatory outcomes or fail to meet the bill’s standards. Companies relying on non-compliant vendors also risk regulatory scrutiny and potential legal challenges.
The bill’s transparency requirements promote openness by mandating disclosures about AI system use, its purpose, and oversight. While this builds trust, it may also lead to greater scrutiny from applicants. Employers should establish clear and accurate communication strategies to mitigate risks of appeals or litigation.
On a broader scale, HB 1709 simplifies compliance by preempting local AI-related ordinances. This creates a uniform regulatory framework for employers operating across multiple jurisdictions in Texas, reducing the complexity of adhering to varying local regulations.
How Can Employers Prepare for Compliance?
With Texas House Bill 1709 likely to take center stage in the legislative session beginning January 14, 2025, employers should begin preparing for its potential passage. By acting now, businesses can mitigate the risks of non-compliance and position themselves for a smooth transition to align with the new regulatory framework.
One critical step is evaluating vendor compliance. Employers should engage with their AI system providers to ensure the tools they use in hiring decisions meet the bill’s proposed requirements, including transparency, bias mitigation, and reporting standards. These discussions can help identify potential gaps and ensure vendors are prepared to meet the heightened obligations of HB 1709.
Internally, employers should review and update their hiring policies to incorporate new disclosure requirements and the obligation to conduct annual impact assessments. These updates will be essential to ensure processes align with the bill’s emphasis on fairness, transparency, and accountability.
Training HR teams is another vital component of preparation. Employers should educate their teams about the capabilities and limitations of AI systems, emphasizing the importance of maintaining human oversight in decision-making. Clear guidance and training will help teams adapt to the new expectations while ensuring that decision-making processes remain compliant and equitable.
Finally, employers should engage legal counsel and technical experts to conduct comprehensive compliance reviews. These professionals can help identify potential risks, ensure that AI-driven hiring practices align with HB 1709, and provide insights into navigating the complexities of the proposed regulations.
By taking these proactive measures, employers can not only prepare for the potential implementation of HB 1709 but also strengthen their commitment to ethical and transparent AI practices.
Parting Thoughts
Texas HB 1709 establishes a detailed regulatory framework for high-risk AI systems, focusing on transparency, fairness, and accountability. Should the bill pass, it will not only redefine how employers in Texas use AI in hiring but also set a precedent for other states considering similar legislation. By tracking the bill’s progress and evaluating their AI tools and processes now, employers can ensure compliance while fostering ethical and responsible AI practices. As more jurisdictions explore regulating AI, Texas HB 1709 could become a blueprint for future AI-related legislation.
Release Date: February 7, 2025
Alonzo Martinez
Alonzo Martinez is Associate General Counsel at HireRight, where he supports the company’s compliance, legal research, and thought leadership initiatives in the background screening industry. As a senior contributor at Forbes, Alonzo writes on employment legislation, criminal history reform, pay equity, AI discrimination laws, and the impact of legalized cannabis on employers. Recognized as an industry influencer, he shares insights through his weekly video updates, media appearances, podcasts, and HireRight's compliance webinar series. Alonzo's commitment to advancing industry knowledge ensures HireRight remains at the forefront of creating actionable compliance content.