The popularity of artificial intelligence is growing exponentially, and with it comes increasing legal obstacles that business owners must recognize and address. The latest updates come with impending compliance deadlines set forth by the EU Artificial Intelligence Act as soon as next August. Even the seemingly innocent AI productivity tools your business is using right now could be non-compliant, putting your company at risk of fines and lawsuits. This emphasizes the importance of all business owners understanding the emerging regulations surrounding AI.
Why the EU AI Act Matters for Your New York or New Jersey Business
If you run a company in New York or New Jersey, aspects of European law matter now more than you might expect. If your SaaS platform, API, or model output is used in the EU, your company is within the scope for compliance with the AI Act.
The EU Artificial Intelligence Act is the first full-scale AI “rulebook” and it applies to non-EU companies when their systems are used by EU customers, even with AI hiring tools, credit and underwriting models, healthcare triage, and certain biometric systems. With respect to global business opportunities, U.S.-based companies that understand the broader impact should be asking to meet these European standards of documentation and oversight as soon as possible.
What Business Owners Need to Know About the AI Act
Understanding what tools are prohibited can help you better understand how this act is designed to provide protection and how to remain compliant. Unethical AI systems like biased social scoring and unfair risk assessment of individuals, tools that exploit or manipulate sensitive information, and unlawful facial recognition are all in violation of the AI Act.
The AI Act’s public website even shows an implementation timetable and assessment tools for business owners. EU guidance has been drafted and the Code of Practice is available for companies that want to align now.
Member States must stand up regulatory sandboxes by August 2, 2026, and whistleblowing protections will explicitly cover AI Act violations starting next August as well.
Practical AI Compliance Tips for NY and NJ Business Owners
Business owners must know how to move forward amidst all the regulatory changes that are coming, whether or not their company is directly linked to EU partnerships as these regulations are starting to expand and become a part of standard business practices.
Some helpful starting points to consider:
- Start with categorizing your system inventory by risk and use case. For high-risk systems identified, implement risk management as well as quality checks and incident logging.
- Build a technical file for each high-risk deployment that includes performance, limitations, and user instructions.
- Update MSAs and DPAs to cover AI specific audit rights.
All these changes and protections being implemented are a signal for business owners to stay updated on AI compliance and ensure their business is set up for success. If you’re implementing AI tools into your business, reach out to the Corporate Law Team at Mandelbaum Barrett PC to learn more about how we can help you remain compliant.