Groundbreaking Lawsuit Tests Whether AI Hiring Tools Trigger FCRA Compliance
The recent lawsuit against Eightfold, an AI-driven recruitment tool, raises significant questions regarding compliance with the Fair Credit Reporting Act (FCRA) and its implications for employers utilizing AI in hiring processes.
Overview of the Allegations
According to the complaint, Eightfold generates detailed reports on job applicants using AI-powered tools that compile and evaluate information, assessing their “suitability” for various positions based on factors such as work history, projected career trajectory, culture fit, and other personal characteristics. These reports are allegedly sold to employers for making employment decisions.
To create these reports, the complaint states that data is fed into Eightfold’s Large Language Model (LLM), which encompasses over 1.5 billion data points derived from job titles, skills, and the profiles of more than 1 billion individuals across various professions and industries.
Methodology of Evaluation
The Eightfold Evaluation Tools reportedly evaluate and rank job applicants by utilizing a combination of data collected during the application process, the employer’s internal data, external data, and proprietary LLM data. This evaluation process includes:
- The candidate’s profile and resume.
- Supplemental data gathered from public sources regarding the candidate’s professional history, such as blogs, publications, and job application history.
- Comparative data from other employees.
- Predictions about the candidate’s potential.
- Data utilized for training Eightfold’s AI.
Furthermore, once a candidate applies for a job through an employer using Eightfold’s tools, the company allegedly retains that applicant’s data for evaluating future applicants for the same or different positions.
FCRA Protections
The FCRA, along with state equivalents such as the Investigative Consumer Reporting Agencies Act (ICRAA), regulates how employers obtain and utilize “consumer reports” for employment purposes, including hiring and promotions. Key requirements of the FCRA include:
- Providing stand-alone written disclosures to employees and applicants.
- Obtaining written authorization prior to acquiring a consumer report.
- Adhering to pre-adverse action and adverse action notice requirements when taking negative employment actions based on consumer report information.
- Ensuring consumers have the right to access, dispute, and correct information in their reports.
Implications for Employers
The Eightfold lawsuit introduces novel allegations concerning whether AI tools could trigger FCRA compliance and background check laws, diverging from traditional employment discrimination statutes. As AI tools have already faced scrutiny for potential unlawful discrimination, this case could set a precedent for future litigation.
Next Steps for Employers
As the Eightfold lawsuit progresses, it may signal a new wave of class-action litigation targeting AI-driven employment tools. Employers are advised to closely monitor this case and others of its kind. They should also review their use of AI-powered recruitment tools, assessing the specific data collected and utilized during applicant evaluations.
Industry experts from Ogletree Deakins’ various practice groups will continue to provide updates on relevant developments in Background Checks, Class Action, Cybersecurity and Privacy, and Employment Law as the situation evolves.
