New California Employment Lawsuit Tackles AI Discrimination

The two women specifically accuse the data collection company of violating federal and California credit reporting laws. Nonetheless, the dispute falls within a developing area of California labor law where twenty-first century artificial intelligence tools run afoul of 1970s era civil rights statutes. The facts described in Kistler are very like those described in Mobley v. Workday, California’s 2025 groundbreaking AI employment discrimination lawsuit.

But the statutes at issue are different. Does this really make a difference or (with apologies to all feline guardians), does it just mean that there’s more than one way to skin a cat?

What went wrong

Both Kistler and Bhaumik hold science or tech degrees and have more than 10 years of experience. Kistler applied to roles at several companies that use Eightfold, including PayPal; Bhaumik applied to companies including Microsoft.

Neither was hired, and both believe that Eightfold’s AI tools played a role. “I’ve applied to hundreds of jobs, but it feels like an unseen force is stopping me from being fairly considered,” said Erin Kistler. “I know I’m not alone in feeling this way.” Kistler and Bhaumik allege that they had no meaningful opportunity to review or dispute Eightfold’s AI-generated report before the reports were forwarded to potential employers.

Eightfold’s technology operates behind the scenes of online job applications at some of the nation’s largest employers, like Microsoft, Morgan Stanley, Starbucks, BNY, PayPal, Chevron, and Bayer. While applicants submit resumes and wait for a response, Eightfold allegedly scrapes vast amounts of personal data from LinkedIn, GitHub, Stack Overflow, and other unknown third-party sources. Much of this data is allegedly inaccurate and incomplete. Eightfold then funnels this information through a proprietary large language model to score and rank candidates based on their supposed likelihood of success in the role.

Compare this to the story told by Derek Mobley. Beginning in 2017, he applied for more than one hundred positions with employers that exclusively use Workday, Inc. as an AI screening platform for hiring. Mobley applied to online job ads on third-party websites such as LinkedIn, Indeed, Monster, or Careerbuilders. He would then be directed to the Workday platform, where he was prompted to upload a resume and required to take a Workday-branded assessment or personality test.

Every application was rejected. Sometimes the rejection took less than an hour. Mobley alleged that Workday violated federal employment discrimination law, including Title VII, the Americans with Disabilities Act, and the Age Discrimination in Employment Act. California labor law incorporates many of the same protections provided by federal law.

Kistler and Bhaumik, on the other hand, allege that Eightfold’s practices violated the federal Fair Credit Reporting Act (FCRA) and California’s Investigative Consumer Reporting Agencies Act (ICRAA), which closely mirrors the FCRA .

FCRA and ICRAA – notice requirements

Both the FCRA and ICRAA regulate background screening, and the process employers must follow when procuring background reports on applicants. Under both laws, employers and other users of consumer reports (including presumably, Eightfold) must provide the applicant with a “clear and conspicuous disclosure” that the report may be obtained for employment. This must occur before they procure the report.

Employers may be held liable for a third-party screener’s violation of the notification requirement in both laws. Under FCRA, employers that violate the law may be liable for actual damages sustained by individual applicants, statutory damages ranging between $100 and $1,000 per individual violation, punitive damages, and plaintiffs’ attorneys’ fees and costs. Failure to comply with ICRAA is similarly substantial.

Right to review and dispute

FCRA requires that job applicants can inspect background reports if the employer uses the report to take adverse action. Before an employer takes action based on a report, it must provide the applicant with a copyt, a summary of their rights, and a reasonable opportunity to respond. 

Section 1786 of the California Civil Code similarly requires that job applicants may request a copy of an investigative consumer report used for employment decisions, including hiring. In general, the ICRAA requires credit reporting agencies to follow reasonable procedures to assure the “maximum possible accuracy of the information” contained in consumer reports.

What’s next for Kistler and Bhaumik?

Their lawsuit is still in its early stages. But considering the potential size of the class that might ultimately be covered, this may be a lawsuit to watch. An even more important question is whether, as with Mobley, job applicants may have an additional tool to tackle the issue of invisible AI-driven employment discrimination.