Workday's Liability Defense In AI Bias Battle Troubles Judge

A California federal judge handling a job candidate's discrimination case over Workday's artificial intelligence-powered hiring tools seemed ready Tuesday to let the legal battle move ahead, as she expressed skepticism about the software developer's assertion that federal employment laws can't reach it.

During a roughly hourlong hearing in the closely watched case, U.S. District Judge Rita F. Lin prodded Workday's lawyer about which entity would hypothetically be liable when a vendor of high-tech workplace tools is aware that its program is spitting out biased results, but the employer using it is none the wiser.

"Is it your view that there would be no intentional discrimination claim against either the employer or the software vendor?" Judge Lin asked Workday's attorney, Erin M. Connell of Orrick Herrington & Sutcliffe LLP.

Connell answered that there could be a disparate impact allegation against the employer — a theory that covers situations in which a neutral policy has a discriminatory result — but there could not be a legal claim against the maker of the tool.

"If the software vendor, just based on these facts, all they did was sell the software to the employer and then the employer chose to use it, the employer is on the hook for that, for their choice of using the software that they purchased," she said. "So even though obviously this vendor in this hypothetical is engaged in a bad act, they intentionally designed the software to discriminate, the reprehensibility of the conduct is not the test for coverage."

Judge Lin kept pursuing this line of questioning, ultimately telling Connell that the company's position doesn't sit well with her because it could leave a dearth of liability.

"What troubles me about Workday's interpretation is the concept that the employer would not be liable for intentional discrimination unless they knew the software was doing something that was intentionally discriminatory," Judge Lin said. "And then, at the same time, the vendor would not be liable either, because the vendor would say, 'Hey, we're just not covered by Title VII.'"

The legal battle was lodged by unsuccessful job seeker Derek Mobley, who alleges in a proposed class action that Workday's applicant screening software — which he said dictates which resumes are passed on to companies — violates Title VII of the Civil Rights Act and other federal anti-discrimination laws by disproportionately turning away candidates who are Black, older and disabled.

Judge Lin is weighing whether the lawsuit should be thrown out or if Mobley's claims have enough legs to propel his case into the fact-finding stage, where Workday would be required to cough up more details about the nature of its programs.

At the heart of the case is whether Workday, as a vendor of high-tech hiring software, fits underneath any of the categories under federal law designed to capture less typical players in the employment sphere that still have some power over workers' opportunities.

Beyond traditional employers, Title VII also applies to employment agencies, which the law defines as "any person regularly undertaking with or without compensation to procure employees for an employer."

Indirect employers and employers' agents are also liable under federal civil rights law. The former group is defined by the courts as third parties that "control access to such employment and … deny such access by reference to invidious criteria." The latter is defined as entities that have been delegated "functions [that] are traditionally exercised by an employer."

Mobley contends Workday's programs bring it underneath all three of these umbrellas. The U.S. Equal Employment Opportunity Commission, the primary federal enforcer of the laws under which Mobley has sued, agreed in an amicus brief lodged April 9.

If Workday's program dictates which resumes are passed on to companies and those selections skew in a biased direction, the EEOC said the company may be liable under Title VII, as well as under the Americans with Disabilities Act and the Age Discrimination in Employment Act.

On Tuesday, Mobley's arguments appeared to gain some traction.

Judge Lin said the liability conundrum she had flagged "seems like exactly the concern" that undergirds the case law surrounding employment agencies.

"It's a fear that we're allowing employers to evade liability by delegating their intentional discrimination to some third party that seems to be outside the scope of the statute, but is actually controlling access to employment positions," Judge Lin said. "With that broad policy in mind, what is Workday's response to that policy concern?"

Connell answered that it's a legislative issue, noting that some states are working on laws to address this, but federal lawmakers currently are not.

"The solution that plaintiff and the EEOC are seeking here truly is a legislative solution," she added later. "Congress could amend Title VII. It could introduce new laws, like the states are doing."

But the way that the statutes are written and the way that the case law has interpreted it, there is broad interpretation, and then there's just going too far, where it really is a legislative fix," she said.

Mobley's attorney, Lee D. Winston of Winston Cooks LLC, staunchly disagreed.

"If your company created the product, you're responsible for it. It's that straightforward," he said. "We're not asking the court to make a reach; we're just asking it to apply the law that exists."

At large, the hearing appeared to go well for Mobley, as Judge Lin repeatedly pressed Workday on its positions that federal laws barring discrimination in employment, like Title VII, cannot touch developers that make tools employers use.

Workday had argued in case filings that "screening" candidates does not amount to "procuring" applicants, just as accounting software cannot be considered to be the user's accountant.

However, Judge Lin indicated more than once that she may consider Workday's program as a "software as a service," rather than a stand-alone tool.

Mobley alleges that job candidates were redirected to Workday's platform, and Judge Lin said Tuesday that these claims seem "different" than if "you go into Costco and you buy TurboTax and you put it on your computer, and then you use TurboTax to prepare your taxes."

It sounds more like a "a software as a service situation," Judge Lin said, in which "employees are being redirected to a Workday platform, which is taking in the application and then performing this analysis and allegedly auto-rejecting people."

"Help me understand how the software here is alleged to be deployed really independently of Workday," she asked Connell.

Connell said the decisions are still only made on the employers' platforms using Workday's software. "It is still the software being deployed by the employer on the employer's platform," she said. "The person, the actor, in this scenario is still the employer."

Judge Lin said she will consider the arguments and hand down a decision in a written order.

Mobley is represented by Lee D. Winston and Roderick T. Cooks of Winston Cooks LLC and Jay Greene of The Greene Law Firm.

Workday is represented by Julie A. Totten, Erin M. Connell, Kayla D. Grundy and Alexandria R. Elliott of Orrick Herrington & Sutcliffe LLP.

The case is Mobley v. Workday Inc., case number 3:23-cv-00770, in the U.S. District Court for the Northern District of California.

--Additional reporting by Grace Elletson. Editing by Nick Petruncio.

For a reprint of this article, please contact reprints@law360.com.