AI and Your Business: How to Stay Smart, Safe, and Compliant

Turn on the news or scroll through your favorite social media app and you are sure to come across someone’s opinions about Artificial Intelligence (“AI”). For every article, hot-take, or social media post, you get a different perspective on what it is, how it will impact the world, and how it will impact your daily life. While there is still much to be determined when it comes to these questions, one thing is clear: AI is here to stay.

Moreover, AI is likely to become more integrated into your life and your work as time moves on, which poses various important questions. Whether you operate a business, lead a team, or manage employees, you must begin to grapple with how AI fits into your workplace. But before getting to the practical issues raised by AI and how it can be used as a tool, more fundamental questions need to be asked. At the end of the day, you need to be smart about how (or even if) you use AI in a given circumstance. Working through these questions protects not only your business and your team but also your clients or customers and the trust they place in you.

So, what are the questions you should be asking yourself? Ask yourself: should I be using AI in my business operations? You may be surprised to realize answering this question is not as simple as it seems. Many professionals have ChatGPT, CoPilot, or DeepSeek downloaded directly onto their devices (and are already using it), but the reality is that people often do not stop to consider how to properly use a new technology in their day-to-day work.

Anyone—when properly trained—can operate the relevant AI applications and use them in their role. The real issue, however, is figuring out when you should use AI and understanding the legal concerns when you do. Technically, it is obvious that you can use AI, but whether you should use AI for a certain task depends on whether you have proper guardrails in place to make sure you use it safely and ethically.

This article is an attempt to provide a starting point for how to think through using AI in a manner that complies with California law and regulations—and good old common sense.

What is AI?

Before diving into the ethics and practical impacts of AI, let’s define what we are even talking about. In October of 2024, California Governor Gavin Newsom signed Assembly Bill 2885 (“AB 2885”) into law to define the term AI for the purpose of clarifying existing California law and providing a uniform definition for the various California agencies that deal with regulation touching on or involving AI. For the purposes of California law, AB 2885 defines AI as an:

“engineered or machine-based system with varying levels of autonomy that can infer from input to generate outputs that influence physical or virtual environments.”

This is the definition used for purposes of this article.

Should You Use AI?

Well, the answer to this question depends on who you are, what you are comfortable with, and what you are using it for. AI is probably not good or bad in and of itself (although some authorities offer well-founded words of caution). Rather, how you intend to use AI—and what you are using it for—will probably help you answer whether you should use it in any given circumstance.

What Does the Law Say?

There is no blanket prohibition on using AI in business operations in California. In fact, its use is becoming more widespread for a variety of purposes. We've spoken with professionals across industries—some are using AI to conduct market analysis, some to develop advertising and marketing materials, and others use AI to perform certain simple drafting tasks.

While not prohibited, it is critical to understand that guidelines must be followed. Employment law, data privacy, IP protection, cybersecurity, contract obligations, and consumer protection (just to name a few) can all be implicated by the use of AI. Business owners and employers must be aware of how AI use intersects with each.

What Does Common Sense Say?

In some circumstances, it may be beneficial to your business to use AI to help draft marketing or promotional materials. If you do, it's your responsibility to ensure that the materials contain accurate information and that the use of AI is clearly communicated to your team or clients.

Conversely, if you use AI to draft a legal contract that would be binding on the parties, did you accidentally engage in the unauthorized practice of law? Whether it is good sense to use AI in your business will depend on a variety of variables unique to each situation. While there is no universal answer, the law and common sense can help you develop a framework for responsible use.

A Framework for Businesses and Employers Using AI

Know the Relevant Rules and Laws at Play

The laws and rules at issue will vary depending on the task AI is being used for. There are major implications for its use in areas such as:

• Data protection and employee privacy rights
• Confidential client or customer information
• Intellectual property issues
• Discrimination and bias in automated decision-making

For example, employers owe duties of care and diligence to their employees and customers. Any use of AI in business processes must be done with competence. This includes:

• Double-checking AI outputs for accuracy
• Understanding how the AI tool works
• Knowing what happens to the information uploaded to it
• Being transparent with employees or clients about your use of AI

Using a platform that sells data or uses inputs to train its model could create major legal issues if confidential information is involved. At a minimum, you need to know:

• What data AI transmits
• How it’s stored and secured
• How it may be used downstream

Garbage In, Garbage Out: Understand AI’s Limitations

AI hallucinates. It can generate false or fabricated information. A well-known example involved an attorney submitting a brief with citations to fake court cases generated by AI.

There is no replacement for due diligence. If you use AI, you must check its work.

Additionally, AI outputs are only as good as the inputs. If you ask poor questions or feed in incomplete or misleading data, you’ll get poor results. AI is not a shortcut for thinking. It’s a tool that still requires thoughtful use.

A Word for Employers and Managers

If you manage a team, ask yourself:

• Do we have policies in place for AI use?

• Are we training our team on legal and ethical risks?

• Do we know who is using AI and how?

• Are vendor contracts and third-party platforms we rely on compliant with confidentiality and privacy obligations?

If you don’t know the answers to these questions, now is the time to start.

Conclusion

This article is just a starting point. There are numerous legal and ethical issues implicated by the use of AI in the workplace, and countless factual scenarios that may arise.

To start on proper footing:

• Know the laws and rules that apply to your business or profession
• Understand AI’s limitations
• Use common sense

AI is a powerful tool—but only when paired with thoughtful analysis and the right guardrails. Use it responsibly, and it can enhance your operations while protecting your business, your team, and your clients.