AI-Driven Employment Litigation Post-Trump AI EO’s
In an era where President Trump has revoked existing federal AI policies and directives and federal agencies have followed suit, several state legislatures and courts are weighing in to account for potential AI-enabled bias in employment decisions, ranging from hiring and recruiting to separation and termination, including regulating the use of automated decision systems (ADS) in the workplace. This post provides a brief overview of some recent AI employment-related proposed legislation and legal challenges.
Proposed State Legislation and Guidance
In January 2025, the New Jersey Division of Civil Rights published a Guidance on Algorithmic Discrimination and the New Jersey Law Against Discrimination, which applies to businesses generally, including employers. Meanwhile, New York also introduced a bill during its last legislative cycle (the “New York AI Act,” S.B. 1169), which sought to place additional hurdles for employers to audit and evaluate their systems for algorithmic bias in their decision-making processes. We expect that bill to be reintroduced in some form during the next legislative session in January 2026. California introduced similar legislation (the “No Robo Bosses Act,” S.B. 7) which would limit the use of ADS in employment decisions and requires human oversight and notice to employees regarding the use of ADS. Both the New York and California laws, if passed, would allow for a right of private action against technology companies as well as the employers utilizing ADS. This newly proposed legislation adds to already existing state and local laws (e.g., Colorado, Illinois, New York City) addressing AI in the workplace.
What is “algorithmic discrimination”?
A key underlying goal in the proposed legislation is to target “algorithmic discrimination” using ADS. Automated decision-making tools, which are technological tools, systems, or processes that are used to automate all or part of the human decision-making process. These tools accomplish their aims by using algorithms, or sets of instructions that can be followed, typically by a computer, to achieve a desired outcome. The algorithms can analyze data, draw correlations, and make predictions and recommendations. However, in doing so, ADS may create classes of individuals who are either advantaged or disadvantaged based on their protected characteristics. Current and proposed laws aim to prohibit algorithmic discrimination no differently than discriminatory conduct by human practices. Employers are not shielded from liability simply by the existence of a third party that developed the tool or because the entity does not understand the inner technologies of the tool.
The Workday, Inc. Case Study
One area to watch closely is the rise of algorithmic bias class actions against AI tools that disproportionately screen out applicants from protected groups. A key case pending in the U.S. District Court for the Northern District of California, Mobley v. Workday, Inc., was brought by an older job applicant, alleging that Workday’s AI-driven applicant screening tools systematically disadvantaged him and other older job seekers, in violation of the Age Discrimination in Employment Act. (He also alleges race and disability discrimination under Title VII and the ADA). Just last month, the court allowed the lawsuit to proceed as a nationwide collective action, as it deemed the main issue of whether Workday’s AI system disproportionately affects job applicants over 40 can be addressed collectively. While the fight continues, third-party research suggests that underlying scoring algorithms without proper controls and training can penalize members of a single group or people with certain combinations of characteristics.
Takeaways for Employers
The Workday litigation may mark a pivotal moment in the evolving legal landscape surrounding the use of AI in employment decisions. Employers must proactively assess their use of and policies regarding algorithmic tools for potential bias to maximize the benefits of their use while eliminating potential exposure. In an ever-changing legal landscape and constant emergence of new technologies, businesses should stay informed to ensure compliance and prevent significant legal exposure and reputational harm.
Authors
