Topics: AI in the Workplace, Employee Hiring, Discipline & Termination, Personnel Policies and Procedures
The integration of Artificial Intelligence (AI) into employment decision-making has revolutionized how companies recruit, evaluate, and manage employees. These high-functioning AI tools are capable of screening job applications, assessing job performance, and even recommending discipline or termination, which can save businesses considerable time and money. But while AI may seem like an impartial decision-maker, it is not immune to bias, and when automated decision systems (ADS) go unchecked, the legal consequences can be severe.
Government Enforcement and Private Litigation
Recent litigation in state and federal courts and enforcement efforts by the Equal Employment Opportunity Commission (“EEOC”) and California Civil Rights Division (“CRD”) underscore the potential shortcomings of AI in the workplace.
In 2023, the EEOC settled a complaint for $365,000 against a company using ADS. The Agency claimed that the Company’s AI software had a disparate impact on certain applicants, rejecting the applications of women over 55 and men over 60. Read more about the case in CDF’s Blog Article addressing the topic.
More recently, a lawsuit in federal district court alleging similar claims was filed against Workday, Inc. The plaintiff, Derek Mobley, alleges that Workday’s AI hiring tool discriminated against applicants aged 40 and over. In a major development, the judge overseeing the matter recently allowed the action to proceed as a nationwide class action. While the federal government may be changing its approach to enforcement, Mobley’s lawsuit illustrates that private litigation may still be used to seek damages against companies.
Efforts to Regulate AI in the Workplace
Over the past year, state and federal agencies, including the Department of Labor (“DOL”), EEOC, CRD, and California legislature have begun preparing guidance for employers, enacting enforcement measures, and drafting legislative bills designed to counteract the potential pitfalls of AI ADS. CDF Labor Law has been keeping up-to-date with these developments and are frequently authoring updated guidance for employers.
Most recently, California lawmakers introduced Senate Bill 7 (SB 7). The purpose of the Bill is to regulate AI-use in the workplace and limit ADS in employment decisions. As noted in our recent article addressing the topic, if passed, this bill would create new and substantial changes for employers, including requiring human oversight of any AI employment decisions, mandating transparency to employees regarding AI use, enforcing regular auditing of ADS tools, and prohibiting certain sensitive personal information of applicants and employees from being provided to the ADS.
These changes, if they become law, would obviously impact how companies use ADS and the potential risks in using those tools. CDF will continue to closely monitor the status of SB 7 and provide updates as they become available.
The Takeaway for Employers
While AI tools can offer efficient solutions, they cannot be left unchecked. Employers must regularly audit these systems, stay informed on evolving regulations, and ensure compliance to mitigate legal risks.
Our team at CDF Labor Law is staying ahead of the curve and is ready to help guide employers through this evolving landscape. Contact Ryan Larocca or your preferred CDF attorney for a consultation to prepare your business for developments in AI regulation, and to ensure compliance with California employment laws.
