Can California Job Applicants Sue Potential Employers for AI-Driven Employment Bias?

Consider, for a moment, the huge number of employers who use similar third-party, AI vendors to do the “first cut” of the hiring process. The really big question hanging in the air is whether the employers can also be found guilty of violating federal and California labor laws.

Rejection at warp speed

Mobley is an African-American man, over the age of forty who suffers from anxiety and depression. Beginning in 2017, he applied for more than one hundred positions with employers that exclusively use Workday, Inc. as a screening platform for hiring. Every application was rejected.

The application process generally went through several steps. Mobley would first respond to an online job ad “on a third-party website such as LinkedIn, Indeed, Monster, or Careerbuilders, which would direct him to the Workday platform on the employer’s website.

The Workday platform would then prompt him to upload a resume or enter his information manually. He was then required to take a Workday branded assessment and/or personality test.

After that, Mobley would receive an email notification that he had been rejected for the position. Sometimes the rejection took less than an hour.

He ultimately filed an employment discrimination lawsuit on behalf of himself and other similarly situated workers in California federal court. The District Court has now approved their motion to proceed collectively.

EEOC Technical Advice

The District Court’s decision springs from a 2023 EEOC technical advice. That advice clarified that employers may be held liable under Title VII of the Civil Rights Act for employment discrimination that results from the use of algorithmic decision-making tools.

The EEOC advises employers to determine whether the AI they are using produces a selection rate for a protected group that is substantially less than the selection rate for another group. Selection rates are determined by dividing the number of applicants by the number of hires for a particular group. Selection rates are then compared by dividing the lower selection rate by the higher selection rate. If the resulting percentage is less than 80 percent, there is an inference that the difference is substantial. The 80 percent rule is not hard and fast but can be used as a general guideline.

iTutorGroup settlement

In 2023 the EEOC settled the first AI-driven discriminatory hiring lawsuit against iTutorGroup. AI was used to hire U.S.-based individuals to provide English language tutoring services to students in China. The hiring software was programmed to reject female applicants age 55 and older and male applicants age 60 and older. The EEOC determined that the practice violated ADEA. iTutorGroup was ordered to pay $365,000 to more than 200 potential tutors automatically rejected because of age.

What now?

In its Strategic Enforcement Plan for 2024-2028, the EEOC prioritized the elimination of barriers in employee recruitment and hiring and declared that it would focus enforcement efforts on employer use of technology, including AI. It seems clear that employers will not be able to avoid liability by using third-party vendors who use discriminatory algorithmic tools in the employment selection process if the vendors are given the authority to act on behalf of the employer.

Based on all these developments, it would be reasonable to assume that this guidance also applies to other employment decisions, like those that affect promotions, training opportunities, scheduling and reductions-in-force. Federal contractors are subject to different and very specific DOL guidance about this issue.

For job seekers, the immediate future is somewhat less certain. The EEOC’s advice remains the same, but as of mid-March, the EEOC itself is unable to act on new cases. It lacks a quorum because the current administration has removed several commissioners.

Derek Mobley and those on whose behalf he sued, however, may still be able to pursue their lawsuit through the federal court system. If all else fails, they may still be able to pursue California state remedies based on the provisions of California labor law.