4 Takeaways As Hiring Bias Suit Over Workday AI Proceeds

A closely watched discrimination lawsuit over software provider Workday's artificial intelligence-powered hiring tools is headed into discovery after a California federal court ruled the company may be subject to federal antidiscrimination laws if its products make decisions on candidates.

U.S. District Judge Rita F. Lin set out an early milestone in uncharted legal territory Friday when she cleared an unsuccessful job seeker's employment bias case over Workday's widely used algorithmic candidate screening software to enter the fact-finding stage of litigation.

Federal antidiscrimination laws, like Title VII of the Civil Rights Act, may reach Workday if its applicant evaluation programs make early calls about which resumes to send up the pipeline, Judge Lin concluded.

The legal battle is on the front lines of civil rights law, as AI use in workplace operations has exploded in recent years, but it's not yet clear if technology developers can be held accountable under federal laws governing employers if their products yield biased results.

Alex W. Karasik, a management-side attorney who is a partner at Duane Morris LLP and a member of the firm's workplace class action group, said companies using or selling workplace-related AI tools need to track the Workday proceedings closely.

"This is definitely a case to watch, as it's a landmark case involving the use of artificial intelligence and the hiring process," he said. "Both employers and technology vendors, particularly those involved with artificial intelligence or algorithmic decision-making tools, absolutely need to pay attention to this case."

He said Friday's decision sets out critical guidelines for courts' evaluations of who may be on the hook when a vendor of AI-based hiring tools faces allegations that its product churns out biased results.

"For a long time, vendors have typically avoided liability in these types of contexts, but this decision makes clear that companies and vendors can't just point the finger at each other," he said. "This court's decision creates goalposts for legal analyses involving vendors' use of artificial intelligence in the screening and hiring processes."

Here are four things to know about the latest development in the cutting-edge case.

Workday's Loss Charts a Path

The case was lodged in early 2023 by Derek Mobley, who is Black, over the age of 40 and suffers from depression and anxiety. He said in a proposed class action that Workday's applicant screening software dictates which resumes are passed on to companies and unfairly disfavors candidates like him.

Mobley, who has degrees and experience in finance and information technology, applied for more than 100 jobs since 2017 that used the Workday platform and was rejected from each one, he said.

The case is still in its early stages, but experts say Judge Lin's Friday discovery order lays out a blueprint for future challenges to survive dismissal.

"The ruling in this lawsuit could potentially provide a framework for the plaintiffs' bar to bring litigation against both businesses and technology vendors using artificial intelligence going forward, as they think of novel ways to prosecute their discrimination claims," Karasik said.

For example, one element of Mobley's complaint that won over Judge Lin was his assertion that he received emailed rejections from Workday-facilitated job applications at odd hours of the night. In one instance, Mobley said he applied through the Workday portal at 1 a.m. and received a rejection less than an hour later.

The timing of these notifications clearly sparked suspicions that automation was in play, Karasik pointed out.

"A reading of the tea leaves suggests the court was skeptical that a human was reviewing and subsequently rejecting plaintiff as a candidate in the midnight hours, therefore putting the AI systems and algorithmic decision-making tools squarely in the crosshairs of the alleged discriminatory employment decision," he said.

"Half a Loaf Decision"

The decision was only a partial win for Mobley. He had alleged that Workday fits underneath several categories within federal law designed to capture less typical players in the employment sphere that still have some power over workers' opportunities, but Judge Lin signed on to only one of those theories.

She said it's plausible Workday is an employer's agent — which the law defines as entities that have been delegated "functions [that] are traditionally exercised by an employer" — but rejected his attempt to allege Workday was an employment agency.

The law defines the latter category as "any person regularly undertaking with or without compensation to procure employees for an employer." Judge Lin reasoned that Mobley hadn't shown that Workday proactively seeks out employees for companies to bring aboard.

Matt Scherer, senior policy counsel for workers' rights and technology at the Center for Democracy and Technology, said her rejection of this claim doesn't align with the modern way many companies are filling their ranks.

"The highly technical reading of the law ignores the reality of the way companies procure employees today," he said. "It is increasingly not by entering into a contract with a traditional employment agency and paying them a commission for every employee that comes along; it's to hire a software vendor, have them sift through lots of resumes and have them recommend candidates that are best suited for the position."

He said the "agent" bucket might capture industry giants like Workday, which offer comprehensive suites of human resources tools for companies. However, he said this category might not reach other vendors of hiring software that might not be as completely integrated in a company's HR system.

"I think that, in all likelihood, this decision will allow recovery against Workday for a discriminatory tool," he said. "But I don't know if this would apply the same way for a company that only sells an automated assessment and doesn't involve itself as deeply in HR processes as Workday does."

The "half a loaf decision" could "leave a lot of people who suffered discrimination at the hands of automated decisions without a remedy," Scherer said.

Outer Limits Identified 

Judge Lin made clear in her order that many software vendors are not considered an employer's agent just because their tool played some role in a discriminatory workplace decision, and she listed a few basic examples for finding that fault line.

If a company uses a software spreadsheet to categorize applicants by birth date and then knocks out the older ones, the maker of that spreadsheet program wouldn't be liable because it wasn't involved in the decision-making, she said. Email providers aren't on the hook if their system was used to convey a discriminatory application rejection, she added.

David L. Disler, counsel at Porzio Bromberg & Newman PC who advises employers, said while this isn't the most comprehensive or illuminating explainer, it's helpful.

"Clients are going to start reaching out to us and saying, 'What can and can't we do, what liability do we have and do we not have?'" he said. "That is the language we might be utilizing."

He said that's another area of debate that will be interesting to track as the case moves forward.

"Where that fine line is, where generative AI crosses over, where you can sue the software company directly, is an interesting facet of this discussion," Disler said.

Next Phase May Spawn New Cases

Mobley's case may undergo another round of dismissal briefings, as Judge Lin gave him an opportunity to rework his claim under California law, but his federal antidiscrimination claims have been cleared to enter discovery.

Experts said this process will likely surface a wealth of information about how exactly AI is being used in workplaces, including whether it's actually making decisions on candidates, what the criteria in play are and which companies are deploying it.

"Discovery may end up opening up Pandora's box in terms of what the algorithmic tools are doing," said Karasik of Duane Morris.

Another management-side lawyer, Joseph G. Schmitt of Nilan Johnson Lewis PA, added that the likely very long list of Workday's customers — the company boasts 10,000 clients on its site — may come to the fore amid fact-finding as well. He said this revelation will give Mobley's lawyers a "road map" for future challenges.

"This becomes an avenue for plaintiffs' counsel to not only bring a claim on behalf of Mobley, but also to search for claims by other individuals who applied for jobs at each one of those companies," Schmitt said.

He also said it's possible that this list of companies will end up in the hands of the U.S. Equal Employment Opportunity Commission.

The agency has already shown interest in the case — filing an amicus brief backing Mobley in April — and Schmitt said it would not be unprecedented for the EEOC to start wielding its enforcement hammer on individual companies after discovering a widely used software program was yielding skewed results.

"If the plaintiffs' lawyers want to, they could get the EEOC involved and tell the EEOC, 'Here are the customers we believe use these tools,' and have the EEOC go after them," he said. "I have seen that happen for preemployment assessment tools used by other vendors."

--Additional reporting by Amanda Ottaway and Grace Elletson. Editing by Bruce Goldman and Emma Brauer.

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