Written by Zachary Cavanagh | KOEGLE LAW GROUP, APC | Of Counsel
Imagine your team using AI tools—from generative chatbots to automated data crunchers—to speed up work and make creative decisions. It sounds like a productivity dream… until an employee accidentally uploads sensitive customer data into a public AI system, a marketing post goes wildly off-brand, a design created with AI sparks an intellectual property dispute, or an AI-generated statement distorts facts so badly it creates legal trouble.
AI is powerful—but left unchecked, it can quickly shift from asset to liability.
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Context: Why It Matters Now in California
AI tools are being adopted by California businesses at lightning speed. Whether it’s drafting simple contracts, personalizing marketing, or analyzing customer trends, these tools offer strategic advantages. But employee misuse of AI can lead to privacy violations, intellectual property disputes, defamation claims, or discrimination complaints.
Without a clear AI policy, you’re leaving your business exposed.
1. Control What Goes Into AI
The Problem
AI tools are only as safe as the data you feed them. Without boundaries, employees might enter confidential information, customer data, or trade secrets into public AI systems—risking breaches and losing control over your intellectual property.
What You Need Instead
- Define approved AI tools and usage scenarios.
- Ban inputting trade secrets, confidential data, or regulated personal information without authorization.
- Require anonymization for customer or employee data.
Why It Matters
California has robust privacy protections under laws like the CCPA/CPRA. Once proprietary data leaves your systems, you may never get it back—and you could face penalties for unauthorized disclosure.
2. Protect Your Intellectual Property
The Problem
Not all AI-created work is automatically yours. U.S. copyright law may not protect certain AI outputs, and some tools incorporate copyrighted or trademarked material in ways that create infringement risks.
What You Need Instead
- Spell out IP ownership rules for AI-assisted work in employee agreements.
- Review AI provider terms to ensure you retain rights to outputs.
- Require legal review before public use of AI-generated content.
Why It Matters
Losing control over your IP—or facing an infringement claim—can cost far more than the time saved by using AI without oversight.
3. Prompt Bias and Fact Distortion
The Problem
AI takes cues from the way a question or task is framed. If an employee’s prompt contains bias or assumptions, the AI will often reinforce and exaggerate that bias—sometimes inventing “facts” or stretching details to be more persuasive. This can turn neutral content into misleading statements or outright falsehoods.
What You Need Instead
- Train employees to phrase prompts neutrally and avoid leading assumptions.
- Require human review of AI-generated content for factual accuracy and tone.
- Ban AI from making factual claims without source verification.
Why It Matters
Misleading or exaggerated content could lead to defamation claims, consumer protection issues, or employee disputes—especially in California, where false statements carry steep legal and reputational costs.
Examples:
- Marketing: A coordinator prompts an AI tool with, “Write a blog post explaining why our product is the best.” The AI delivers a persuasive article—but it includes inflated statistics, unverified claims about competitors, and sweeping performance statements without evidence. If published, your business could face false advertising allegations or competitor complaints under California’s consumer protection and unfair competition laws.
- HR: A manager prompts an AI tool with, “Write a summary about why this employee deserves to be fired.” The AI assumes the employee’s guilt and produces a detailed, persuasive write-up—even adding assumptions about misconduct that never occurred. If shared internally, this could be used as evidence of bias and defamation in a wrongful termination claim.
4. Address Bias, Accuracy, and Discrimination Risks
The Problem
Even with a neutral prompt, AI models can perpetuate bias—especially in hiring or personnel decisions, customer interactions, or content moderation—without oversight.
What You Need Instead
- Prohibit unvetted AI in hiring or other sensitive decisions.
- Require human review for AI-generated outputs that impact people.
- Audit AI-generated content for accuracy, fairness, and bias.
Why It Matters
A biased AI decision can create legal exposure under California’s Fair Employment and Housing Act and damage your brand.
Example:
An HR department uses AI to help draft annual performance reviews. Because the AI was trained on historical company data that contains subtle gender bias, it tends to describe male employees as “leaders” and “innovators” while describing female employees as “supportive” and “dependable.” Over time, this pattern could contribute to unequal promotion opportunities and trigger gender discrimination claims under California law.
5. Keep AI on Brand
The Problem
AI-written social media posts, marketing copy, or customer responses can stray from your company’s tone—or say something that doesn’t align with your values.
What You Need Instead
- Limit AI content creation to trained staff.
- Require review against your brand style guide before publishing.
Why It Matters
Off-brand or insensitive messaging can go viral for all the wrong reasons, leading to public backlash.
6. Monitor, Update, and Train
The Problem
AI technology—and the law—are evolving quickly. A policy written today may be outdated in six months.
What You Need Instead
- Assign HR or Legal to track AI use and legal changes.
- Review and update your policy regularly.
- Provide short, recurring training so employees stay aligned.
Why It Matters
An AI policy is only effective if it keeps pace with technology and regulation.
Pro Tip Checklist: Is Your AI Policy Ready?
- Authorized AI tools and usage rules set
- Privacy and IP safeguards in place
- Neutral prompting and fact-checking required
- Bias and accuracy audits in place
- Brand review process established
- Ongoing monitoring and training scheduled
How Koegle Law Group Can Help
At Koegle Law Group, we understand how powerful—and risky—AI has become for California businesses. We draft AI policies tailored to your operations that protect your data, safeguard your intellectual property, and keep your messaging compliant and on brand. Our guidance ensures employees can innovate without putting your business at risk.
Don’t let AI misuse become tomorrow’s crisis. Contact Koegle Law Group today to create a policy that keeps your business safe—and your employees from going rogue.
