The recent U.S. Senate decision to remove a 10-year ban on state-level AI regulation from President Trump’s vast tax cuts and spending bills represents a victory for employers, but has raised concerns about “regulation fragmentation” for some tech companies.
“This is a victory for employers as long as it reduces the uncertainty or disruption that the moratorium would have created,” said Niloy Ray, Littler’s shareholder and a core member of the company’s AI and Technology Practice Group.
However, according to Inchas, an industry association representing technology and telecommunications companies, including Google, Meta and Microsoft, the AI Act patchwork flag has been featured when states allow them to advance their own regulations.
The group advocating competitive-friendly policies issued a statement opposed to the state’s ban on regulations ahead of the Senate decision.
“With more than 1,000 AI-related bills nationwide, a suspension is necessary to avoid fragmentation of regulations that could harm U.S. AI leadership,” the statement reads. “This is not a California competition with China, not New York or Colorado. It’s an American race and calls for a unified national strategy.”
The ban would be more problematic than allowing states to develop AI regulatory frameworks, Ray said. That’s because federal moratoriums could have caused constitutional challenges and legal disputes, causing further disruption to employers seeking to comply with potential regulations.
While current arrangements for state-level regulation are “hard” they believe that Ray is more predictable than the potential legal disruption that federal intervention could cause.
Recent data from Littler’s 2025 annual Employer Survey released in May reveals that nearly a third of employers surveyed have increased or already increased AI use in the workplace. Researchers attribute this trend to weak enforcement in the current regulatory environment and expectations of a light federal approach under the Trump administration.
However, the increase in AI usage is closely tied to a broader business pattern than legislative movements, says Ray. He argues that the ongoing lack of comprehensive federal oversight is a more important factor in AI adoption than lifting moratoriums.
“The survey was cooperated before the moratorium was introduced, so respondents’ outlook was not taken into consideration,” adds Ray.
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A manageable regulatory environment?
Recent actions at the state level suggest a future for more manageable regulations, Rays said it points to a recent update to California’s fair employment and housing as an example of AI regulations that evolve in ways employers can handle. He says this approach could serve as a model for other states and influence them to rethink more aggressive proposals.
States such as Colorado, which are considering stricter regulations, could dial back some of the more stringent requirements. He believes that this type of revision could encourage the development of a more consistent national framework for AI regulation. This highlights transparency, practical impact assessments, collaboration with Americans with Disabilities Act, and greater scrutiny of high-risk AI applications. This style of measured, state-driven approach provides a clearer pathway for employers navigating AI regulations in the workplace, says Ray.
Experts encourage HR leaders to inform them. The moratorium was eventually removed from the spending bill, but its initial inclusion highlights the Trump administration’s intention to limit AI surveillance, according to lawyers Danielle Ochs and Zachary V. Zagger of Employment Law Firm’s technical practice group. “Employers may want to keep an eye on new developments,” the lawyer wrote in a recent blog post.
