When Artificial Intelligence Discriminates: Employer Compliance in the Rise of AI Hiring
Job applicants often worry about what may prevent them from obtaining a position. Although applicants understand that lack of qualifications or experience can work against them, they might be less aware that recruitment and hiring tools used by employers may also work against them.
The processes employers use to narrow applicant pools and select candidates are becoming increasingly automated. Indeed, the World Economic Forum reported in 2025 that approximately 88% of companies are already utilizing some form of artificial intelligence (AI) in candidate screening.
Benefits and Risks of AI in Hiring
AI can be an incredibly useful tool for employers to streamline and customize hiring processes, but its use is not without risks. Consider an online platform that matches an employer’s job posting with an applicant’s credentials and prioritizes candidates for the employer’s review based on an algorithmic assessment of how strong the match is, or a machine learning mechanism that observes existing hiring practices and adjusts its recommendations to best suit the employer.
Although these sound like convenient and logical ways to sift through candidates and identify those who will best meet the needs of the position, they are exactly the tools at issue in Mobley v. Workday, Inc., a lawsuit filed in a California federal court in 2023 alleging that these AI-based hiring systems unlawfully discriminate against job applicants.
The Mobley Case
The action was brought by Derek Mobley, who claims he applied for dozens of jobs with employers using AI hiring tools created by Workday, a company providing human resources and finance support, and was rejected every time. Workday has pushed back against Mr. Mobley’s claims by asserting that although it provides certain tools to aid the hiring process, the ultimate hiring decision is made by the employer, not the Workday tools.
Mr. Mobley counters that he was sometimes rejected within hours or minutes of applying, suggesting that Workday’s automated screening tools were making the rejection decisions on behalf of employers.
As an African-American over age 40, Mr. Mobley alleges these “smart” tools disparately impacted him by deprioritizing him based on protected characteristics and automatically incorporating previous employer bias. He also alleges these tools have impacted a broad class of job applicants and asserts claims under the Age Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964, and the Americans with Disabilities Act.
The federal court hearing his case granted preliminary collective certification of a class of applicants in its most recent decision. Those applicants in the defined class have until March 7, 2026 to opt into the case. As it develops, the case will provide insight not only into Mr. Mobley’s specific claims but also into how judicial attitudes are evolving and how similar issues may be resolved in the future as AI continues integrating into employment.
The Implications for Employers
The Workday case serves as a warning about the risks involved in leveraging AI tools in recruitment and hiring. It is not the only example of such risk. Lawsuits alleging discrimination by AI tools and employers using them have been increasing since 2022, and show no signs of decline, especially as judicial opinions provide insight on these cases.
Even well-intentioned employers may be exposed, as it is difficult to assess compliance with systems that are algorithmic and create nontransparent outcomes. One emerging certainty is that employers cannot hide behind the automated nature of their hiring tools at the risk of engaging in unlawful, albeit unintended, discrimination.
Recommendations for Employers
- Seek to understand what a tool is designed to evaluate and how it was trained and tested for bias before delegating hiring processes to it.
- Use tools that provide insight into why a candidate was prioritized or deprioritized, rather than those issuing decisions without explanation, to ensure decisions are supported.
- Regularly assess the functionality and output of AI hiring tools to detect any potentially discriminatory assessments.
- Ensure AI-supported processes are just that—supported. AI should assist, but final decisions should remain with human decision-makers in the hiring process.
Conclusion
Seeking efficiency and value in hiring is not unlawful—it is a smart business practice. However, the Workday lawsuit and the rapidly evolving AI landscape remind employers to carefully consider risks. Maintaining oversight and clarity throughout the hiring process will help employers navigate potential pitfalls and ensure fair practices that produce ideal candidates without unfair exclusion.
