Written by Brian Koegle, Founding Partner
California business owners are used to their state being the tip of the spear in ambitious — and sometimes painful — new legislation that affects how they run their companies. From meal-and-rest-break rules to PAGA suits to mandatory pay transparency, California has long set the national standard for aggressive employment and business regulation. So, when New York quietly steps into that role on a new hot-button issue, California employers should pay very close attention. What lands in Albany today tends to find its way to Sacramento tomorrow.
What New York Just Did
On December 11, 2025, New York Governor Kathy Hochul signed S.8420-A/A.8887-B — the AI Transparency in Advertising Act — into law. It takes effect June 9, 2026, making New York one of the first states in the country to directly regulate how artificial intelligence is used in advertising.
The law’s core requirement is straightforward: if your commercial advertisement uses a “synthetic performer” — defined as an AI-generated humanlike figure that is not a real, identifiable person — you must include a clear, conspicuous disclosure that AI was used. This applies to brands, production companies, ad agencies, franchisors, franchisees, and local production partners alike. If your ad runs in New York or is created for distribution there, you are required to comply with this new regulation!
The law is not limited to television commercials. It extends to digital advertising, social media campaigns, and influencer marketing. There are limited carve-outs from this new law for audio-only content and AI used strictly for language translation, but the reach is broad enough that most businesses running any form of image-based or video advertising need to pay attention.
The penalties are real. First violations carry a $1,000 civil fine. Repeat violations jump to $5,000 — per violation. And New York did not stop there: the same legislative package also expanded post-mortem publicity rights, meaning advertisers now need explicit consent from a deceased person’s estate before using a realistic AI-generated version of that person’s voice or likeness.
Why California Business Owners Should Care Right Now
California is already moving on multiple AI-related fronts. Governor Newsom signed several AI laws in 2025 that took effect January 1, 2026, including AB 853 (the California AI Transparency Act), which imposes labeling and provenance disclosure requirements, and AB 316, which broadens civil liability exposure when AI is alleged to have caused harm. California also enacted AB 1836 and AB 2602, which regulate the use of AI-generated likenesses of both deceased and living performers — the latter adding significant restrictions to talent and contractor agreements.
What California has not yet enacted is a New York-style across-the-board advertising disclosure law specifically targeting synthetic performers in general commercial ads. That gap is unlikely to last. California’s legislature watches national trends closely, and the state’s AI regulatory appetite shows no signs of slowing. A bill that passed in New York — with bipartisan support, clear consumer-protection framing, and defined penalty structures — is exactly the kind of template Sacramento looks to when drafting its next wave of legislation.
Practically speaking, if you are a California employer or small business owner who uses AI-generated images, virtual spokespersons, AI avatars, or digitally created human figures in your advertising or social media — even locally — the compliance clock is already ticking. If your ads also reach New York consumers, you are already subject to that law when it becomes effective this summer.
What Small Business Owners Should Do Today
You do not need to panic, but you do need a clear plan of action. Here are a few practical first steps:
Audit your current advertising. Take stock of whether any of your current marketing materials — website, social media, print, video, or digital ads — use AI-generated images of people that are not real, identifiable individuals. If your creative agency or marketing vendor uses AI tools, ask them directly.
Review your vendor contracts. Under New York law, a brand is responsible for its agency’s non-compliance. Contracts with marketing firms, social media agencies, and content creators should include representations about AI use, disclosure compliance, and indemnification if they fail to comply. California’s laws impose similar downstream liability risks.
Get ahead of the disclosure practice. Even if California has not yet passed a direct analog to New York’s law, proactively labeling AI-generated content is quickly becoming an industry norm. Consumers and regulators are paying attention. Being transparent now builds trust and reduces legal exposure later.
Consult employment and business counsel. The intersection of AI, advertising, employment law (particularly when AI affects hiring, pricing, or consumer-facing staff), and intellectual property is becoming a complex compliance landscape. A short consultation now can save significant liability exposure later.
The Bottom Line
New York blinked first — but California is watching. Small business owners who use AI in their advertising and marketing today are operating in a rapidly shifting legal environment. The time to understand your obligations, update your contracts, and build a disclosure practice is now, not when the state legislature passes the next bill and gives you 90 days to comply.
Brian Koegle is the founding partner of Koegle Law Group, APC, a boutique litigation firm specializing in employment law counseling and litigation throughout California.
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Brian Koegle is the Founding and Managing Partner of Koegle Law Group, APC, a boutique employment law and business litigation firm with offices in Valencia, California and Celina, Texas. The firm advises small to mid-sized employers across California and Texas on employment compliance, business litigation, and emerging legal issues. This article is provided for general informational purposes only and does not constitute legal advice. For questions about your specific situation, contact Koegle Law Group at www.koeglelaw.com.