Introduction
The integration of AI-driven automated recruiting tools in business operations is becoming increasingly prevalent, offering enhanced efficiency and reduced costs [9]. However, this trend raises significant concerns regarding potential biases and transparency issues, particularly in the context of employment discrimination.
Description
A significant number of businesses are investing in AI-driven automated recruiting tools [5] [6], which enhance efficiency [5] [6] [9], reduce HR workloads [5] [6], and lower costs [5] [6]. However, the use of AI in hiring raises concerns about potential bias and lack of transparency [5]. These automated decision systems (ADS) can efficiently screen job applications, assess performance [1], and recommend disciplinary actions [1], but they have also been implicated in discrimination claims based on race, gender [4] [5] [6] [7], age [1] [3] [4] [5] [6] [7] [8], or disability [4] [5] [6] [8].
Recent legal actions underscore the risks associated with AI in the workplace [1]. In 2023, the Equal Employment Opportunity Commission (EEOC) reached a settlement of $365,000 with a company for using an ADS that disproportionately affected women over 55 and men over 60. Additionally, in the case of Mobley v. Workday [1] [2] [3] [4] [5] [6] [7] [8] [9] [10], Inc. [1] [2] [3] [5] [6] [8] [10], a class action lawsuit is advancing in federal court against Workday, an AI-powered software platform used for applicant screening [8]. The lead plaintiff [4] [7], Derek Mobley [2] [3] [7], a 40-year-old African American male with anxiety and depression [2], claims that the algorithm led to repeated job rejections for candidates over the age of 40, particularly affecting African American applicants and those with disabilities [2]. This potentially violates the Age Discrimination in Employment Act (ADEA) and other federal laws, including Title VII of the Civil Rights Act and the Americans with Disabilities Act Amendments Act. Mobley reported being rejected from over 100 job applications utilizing Workday’s AI tools [2]. The court has allowed this case to proceed as a nationwide collective action under the ADEA [4], recognizing Workday as an agent of its client-employers under various anti-discrimination laws [5] [6]. This ruling indicates that companies cannot evade discrimination liability by outsourcing hiring functions to AI systems [8], reinforcing the principle that employers cannot escape liability for discrimination by delegating hiring functions to third parties [8], whether human or automated [8].
Employers utilizing AI in hiring must understand the algorithms’ workings and be prepared to explain their role in hiring decisions to avoid adverse impacts on protected groups [5]. While courts have yet to establish clear rulings on the legality of AI screening under federal or state anti-discrimination laws [5] [6], several states are enacting regulations to address these challenges. California has initiated significant regulatory measures regarding the use of AI in the workplace [10], particularly concerning hiring and management tools [10]. Employers must provide at least 30 days’ written notice to employees [10], applicants [1] [2] [3] [4] [7] [8] [10], and contractors before implementing an ADS and must disclose all such tools in use [10]. Human oversight is mandated [4] [10], prohibiting reliance solely on AI for employment decisions like hiring or firing [10].
California’s new civil rights regulations [4], effective July 1, 2025 [5] [6], will affect the use of ADSs in employment, aiming to prevent discrimination based on protected characteristics such as race [4], gender [4] [5] [6] [7], age [1] [3] [4] [5] [6] [7] [8], disability [2] [4] [5] [6] [8] [9], or religion [4]. These regulations will make it illegal to use any system that results in discriminatory outcomes [4], particularly those analyzing candidates’ voices [4], facial expressions [4], or other traits that could lead to biased results [4]. The Colorado Artificial Intelligence Act [1] [5] [6], effective February 1, 2026 [5] [6], mandates transparency in AI interactions and aims to prevent algorithmic discrimination in employment decisions [6]. Similarly [5] [6], amendments to the Illinois Human Rights Act [5] [6], effective January 1, 2026 [5] [6], will prohibit discriminatory AI practices in hiring [5] [6].
Employers must recognize their liability for the discriminatory effects of third-party AI tools used in hiring [4]. It is essential to audit hiring systems that utilize AI [4], ensuring they are bias-tested and that human oversight is maintained in decision-making processes [4]. Regular evaluations of hiring outcomes across various protected class categories are crucial [9], with significant disparities warranting further investigation [9]. Workers are granted rights to access and correct data used by an ADS and to appeal AI-driven decisions to a human reviewer [10]. Keeping detailed records of hiring decisions and their justifications is vital [9], and organizations should avoid making critical hiring decisions solely based on automated systems [9]. Establishing a cross-functional team comprising HR [7], legal [1] [2] [3] [4] [5] [6] [7] [8] [9] [10], and IT professionals is recommended to develop policies, evaluate AI systems [7], and monitor their ongoing use in employment [7].
Recent proposals for federal oversight of AI [5], including a temporary ban on state and local regulations to create uniform oversight [6], have faced significant opposition and are unlikely to pass [6]. Employers should remain vigilant about evolving state-specific AI regulations [5] [6], conduct regular audits of their AI systems [1], and consider legal counsel to navigate compliance and mitigate litigation risks [6]. State and federal agencies [1], including the Department of Labor (DOL) and the EEOC [1], are actively developing guidance and legislative measures to address the challenges posed by AI in employment [1], making it essential for businesses to stay informed and ensure adherence to employment laws. Implementing an AI Governance program is essential for establishing guidelines and best practices for AI use in hiring [9], facilitating ongoing monitoring of AI tools [9], and ensuring human oversight in decision-making processes [4] [9]. As legal interpretations evolve [9], it is anticipated that courts will increasingly clarify the parameters of AI liability in employment contexts [9], emphasizing the necessity for algorithmic accountability in hiring processes [3].
Conclusion
The adoption of AI in recruitment processes presents both opportunities and challenges. While it offers efficiency and cost benefits, it also necessitates careful consideration of potential biases and legal implications. Employers must remain proactive in understanding and managing the impact of AI tools, ensuring compliance with evolving regulations and maintaining accountability in hiring practices. The ongoing development of state and federal guidelines will play a crucial role in shaping the future landscape of AI in employment, underscoring the importance of vigilance and adaptability in this rapidly evolving field.
References
[1] https://www.callaborlaw.com/entry/ai-in-hiring-litigation-and-regulation-update
[2] https://www.lexology.com/library/detail.aspx?g=46029a5e-74be-461a-8f1c-5a34409af9bd
[3] https://www.linkedin.com/pulse/ai-hiring-workday-lawsuit-what-means-employers-lasley-mshr-sphr-b8j8e
[4] https://www.hollandhart.com/new-ai-hiring-rules-and-lawsuits-put-employers-on-notice-what-hr-needs-to-know
[5] https://www.steptoe-johnson.com/news/the-ever-changing-legal-landscape-of-state-and-federal-regulations-for-using-ai-in-candidate-recruiting-and-screening/
[6] https://www.jdsupra.com/legalnews/the-ever-changing-legal-landscape-of-4174536/
[7] https://www.jdsupra.com/legalnews/new-ai-hiring-rules-and-lawsuits-put-1121603/
[8] https://hulr.org/spring-2025/ai-as-an-employment-agent-what-mobley-v-workday-addresses-and-what-it-doesnt
[9] https://www.salary.com/newsletters/law-review/what-employers-and-recruiters-need-to-know-about-the-workday-ai-lawsuit/
[10] https://natlawreview.com/article/2025-review-ai-and-employment-law-california
