Labor & Employment Law Update

With AI transforming everyday HR operations comes major opportunities and significant risks for employers.  As these tools become more embedded in workplace decision‑making, they also raise serious concerns about fairness, accountability, and legal exposure. Understanding how AI works and where it can go wrong is now essential for any employer using or considering these technologies.

Our recent webcast explored these developments and offered practical guidance for employers implementing or considering AI solutions. Below are several high‑level takeaways.

AI Can Streamline Hiring, But Creates Heightened Risk of Bias and Discrimination

AI is powering digital tools commonly used throughout the employment lifecycle, like resume screening and performance analysis. Although AI can help organizations move faster and  aim for consistent evaluations across applicants and employees, there’s a catch: AI learns from past human decisions and humans aren’t bias‑free.

Algorithms can unintentionally replicate discriminatory patterns, sometimes in subtle ways. For example, a zip code might act as a proxy for race, or resume analysis software may skew selection away from candidates who have a gap in employment because of a disability. Even resume phrasing can impact how an applicant is “scored.”

Recent lawsuits highlight that courts are now paying attention. In Mobley v. Workday, for example, a federal judge allowed a job applicant’s lawsuit against Workday to proceed as a nationwide class action, finding that Workday’s AI-powered hiring tools may have had a discriminatory impact on applicants over the age of 40.  This ruling signals that AI vendors – and the employers who rely on them – can be held responsible if AI tools have biased results. Employers cannot defend discriminatory outcomes by blaming the algorithm or claiming that it did not intend to discriminate.

New State Laws Create Compliance Patchwork

If keeping up with employment laws already feels challenging, AI regulations raise the stakes. There is no federal law regulating the use of AI in employment.  In its place, states and cities have and continue to roll out new laws that specifically identify discrimination resulting from AI-driven employment tools as civil rights violations. 

Many of these laws require employers to give applicants notice when AI is being used, document how automated tools work, maintain detailed records, and even perform bias audits. However, each state and municipal law is nuanced in its own way.  For multistate employers, this means compliance can vary dramatically depending on where a candidate lives or works. The rules aren’t optional and the potential exposure for employers is growing.

Employers Need Clear Policies, Strong Oversight, and Regular Audits

Employers can use AI responsibly, but it takes structure and intentionality. That means:

• Knowing exactly which AI tools are already in use internally (you’d be surprised).
• Vetting vendors and understanding how their systems are trained.
• Creating clear, transparent AI policies.
• Regularly auditing AI outputs—ideally with legal oversight.
• Training HR and managers so AI supports decision-making, not replaces it.
• Staying on top of legal regulations governing AI use, which are regularly evolving due to increased use and technological advancements.

Most importantly, employers should always keep human oversight in the loop. AI can surface insights, but people still need to make and explain the final decisions.

To dive deeper into these issues and hear the full discussion, watch the full webcast on demand.