SB 1047 AI Safety Bill: Everything You Need To Know

Artificial intelligence (AI) is transforming how businesses operate. From automating routine tasks to providing advanced analytics, AI has become a core productivity tool for businesses of all shapes and sizes.

With these advancements come challenges and concerns regarding safety, privacy, and accountability. The California SB 1047 AI Safety Bill was introduced as a direct response to these concerns. The bill was designed to regulate the development, use, and deployment of AI systems to ensure they were safe, transparent, and ethical.

If you’re a business owner, it can be helpful to know how SB 1047 might have affected you. This article will cover just that, along with how Mosey can help you manage state compliance.

What Is SB 1047?

SB 1047, often called the AI Safety Bill, was legislation focused on regulating the use of artificial intelligence in business and society. Its goal was to set guidelines and safety measures for businesses that use AI, ensuring these technologies were utilized ethically and responsibly.

Did SB 1047 Pass?

Although SB 1047 passed the California State Assembly in August, it was vetoed by the Governor of California on Sept. 29, 2024. In his message to members of the Senate, Gov. Gavin Newsom stated that while he believes in regulating AI technology, he disagreed with the methods proposed by SB 1047.

While SB 1047 did not become law, Gov. Newsom’s statement suggests that future AI regulations could still be possible in California. As such, learning the details of this bill can help business owners prepare for future AI legislation.

What Were the Key Objectives of SB 1047?

The primary goal of SB 1047 was to make sure AI systems were developed and used responsibly. The bill mandated protecting consumers, employees, and businesses from the potential risks associated with AI by promoting transparency in how AI decisions were made.

The bill supported accountability in cases where AI could cause harm or create biased outcomes, holding AI operators accountable for the algorithm’s decisions. This accountability would have encouraged AI operators to thoroughly review results and outcomes before making significant decisions based on AI output.

The SB 1047 bill could have significantly impacted how business owners deploy AI in their operations.

How Would SB 1047 Have Impacted Business Owners?

SB 1047 would likely have imposed new responsibilities and expectations regarding AI use. The bill did not aim to stop AI use entirely — instead, it sought to regulate it to ensure safety, fairness, and accountability.

New Compliance Requirements for AI Tools

One of SB 1047’s most immediate impacts would have been the introduction of compliance requirements for businesses using AI. Under the bill, companies would have to ensure that their AI systems meet specific safety and transparency standards.

That means you might have needed to regularly assess your AI systems, especially if they were involved in decision-making processes affecting employees, customers, or other businesses. If you used AI in hiring, you may have had a greater responsibility over the outcome of automated screening processes.

Businesses might also have been required to disclose how AI systems make decisions, particularly if these decisions impacted people’s lives or finances. For example, if your AI system was used to evaluate loan applications, you might have needed to explain how the algorithm works and ensure there was no bias.

Increased Data Protections

SB 1047 would likely have restricted how businesses collected and used data through AI. You would have had to ensure that customer and employee data was protected and that your AI systems complied with privacy regulations.

If you were licensing an AI tool, their data privacy policy might have differed from your own privacy policy. If they weren’t perfectly aligned, you would have needed to make new disclosures regarding how information was used.

Compliance could have meant investing in additional resources, such as AI specialists or legal consultants, to help ensure that your AI systems met these new standards.

Potential Liability Issues

The SB 1047 bill introduced provisions that made businesses liable for the actions of their AI systems. Suppose your AI system made a decision that resulted in harm, whether to an employee, a customer, or another business; you could have been the one held accountable.

SB 1047 also aimed to ensure that AI-driven systems were fair and unbiased, particularly in decisions involving people. If you used AI in your hiring process and the system was found to have discriminatory practices, your business could have faced legal consequences.

It wouldn’t have mattered if someone within your organization hadn’t directly committed the discriminatory act. When using AI in place of an accountable human, everyone responsible for overseeing its use would be responsible for the outcome.

Increased Costs for AI Management

Many businesses use AI because it’s currently more cost-effective than employing additional professionals or teams to complete work that can be automated. However, SB 1047’s requirements would have made AI more expensive to use.

Making sure that AI systems meet the safety and transparency standards outlined in the bill could have required additional investment. Businesses might have needed to hire AI experts, cybersecurity professionals, and legal advisors to maintain compliance with the new regulations.

How Would SB 1047 Have Impacted Specific Industries?

SB 1047’s impact would have varied depending on the industry in which your business operates. Some industries would have been more directly affected than others, particularly those that rely heavily on AI for decision-making, data analysis, or customer interactions.

Finance and Banking

In finance and banking, AI is often used for fraud detection, loan approvals, risk management, and personalized customer service. Under SB 1047, financial institutions would have had to ensure that their AI systems are transparent, fair, and compliant with data privacy laws.

AI systems that evaluate loan applications would also have had to be free from bias and provide clear explanations for decisions. Businesses would have needed to disclose the criteria used in AI algorithms and demonstrate that no discriminatory practices were occurring.

Healthcare

AI is increasingly used to diagnose diseases, recommend treatments, and manage patient records. SB 1047 would have significantly impacted the health sector, as safety, transparency, and accountability are critical in patient care.

AI systems used for diagnosing conditions or recommending treatments would need to be thoroughly vetted for accuracy and safety. Misdiagnoses or errors in treatment recommendations could lead to serious harm, and under SB 1047, healthcare providers could have been held accountable.

Healthcare organizations would also have to ensure that AI systems handling patient data comply with data privacy regulations. Under the bill, breaches or misuse of personal health information could have resulted in severe penalties, including HIPAA violations.

Manufacturing

AI is revolutionizing the manufacturing and supply chain industries by optimizing production processes, predicting maintenance needs, and streamlining logistics. SB 1047 would have required manufacturers to closely monitor the performance and safety of their AI systems.

AI systems involved in product design and manufacturing would have had to meet stringent safety standards to prevent defects. If AI-driven errors led to product malfunctions, businesses would face liability claims.

Retail and E-Commerce

Retailers and e-commerce platforms often use AI for customer personalization, inventory management, and recommendation engines. Retailers would have to ensure that their AI-driven recommendation engines respect customer privacy and are transparent about data collection and use. Failing to do so could have led to penalties under the bill.

AI systems that determine pricing, discounts, or promotions would have to be free from bias. For example, an AI system that unfairly offered better prices to one demographic group over another could have resulted in legal challenges.

What Would the Effects of SB 1047 Have Been on Small Businesses?

Small businesses using AI to streamline their hiring processes would have to ensure they comply with SB 1047’s requirements. While larger corporations may have had more resources to invest in AI audits and compliance, small businesses would have needed to allocate additional funds or hire outside help to meet the bill’s standards.

The most significant concerns about AI in business are discrimination and data privacy. Small businesses have to hire the right people, regardless of their demographics, and safely handle customer information. While AI can be helpful, it can also be harmful when making such decisions.

Small businesses still have many important considerations to make about how AI can play a safe and effective role in their futures, including whether to shift away from AI tools and move toward manual labor for hiring and marketing.

Mosey Can Help You Stay Compliant

If SB 1047 had passed, it would have undoubtedly created new compliance requirements for many California businesses.

Though this bill was vetoed, staying on track with the changing landscape of business compliance is crucial — let Mosey help you stay on top of it.

Our compliance management system simplifies the process of reviewing state and local regulatory requirements. Book a demo with Mosey to learn how we can help you streamline compliance.

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