December 23 Tip of the Week

“AI in Hiring Tools”

Many employers have been using recruiting and hiring systems that use artificial intelligence to review candidates for open positions and to recommend certain applicants for further action on their applications.  The Equal Employment Opportunity Commission launched an initiative on artificial intelligence and algorithm fairness in 2021.  The purpose of this initiative was to ensure that the algorithms used by various job applicant software were not biased in their treatment of certain types of applicants.  See, https://www.eeoc.gov/newsroom/eeoc-launches-initiative-artificial-intelligence-and-algorithmic-fairness. This initiative represented the first attempt to ensure that artificial intelligence tools did not unfairly discriminate against certain demographic groups. 

The push to regulate the use and development of artificial intelligence tools in all areas of our lives has begun and there have been disagreements among federal and state government officials about the need to regulate or place restraints on the use of artificial intelligence.  While the appropriate regulation of artificial development is still a largely unsettled issue, four states have implemented new laws and requirements related to the use of artificial intelligence.  Each of these state laws acknowledge the potential bias of these tools in the hiring process and require both users and developers of artificial intelligence systems that use algorithms to meet specific requirements that protect against such bias. 

For example, Colorado recently passed a law that addresses algorithmic discrimination and requires both developers and deployers of high-risk artificial systems to use reasonable care to protect users of that system from any known or foreseeable risks of algorithmic discrimination.  The statute also requires developers and deployers of these systems to establish risk management policies and programs related to preventing such discrimination. 

Effective October 1, 2025, California amended its Fair Employment and Housing Act (“FEHA”) to include new regulations on the use of artificial intelligence and automated decision-making systems in the hiring process.  Under these new regulations, an employer who chooses to use these tools must ensure that these tools do not discriminate in their application.  To meet this obligation, employers should conduct audits on the tools they are using to make sure that they do not discriminate against applicants on the basis of any protected classification and that the employer is able to accommodate any disabilities or religious beliefs in the hiring process. 

Texas has also passed legislation regarding the use of artificial intelligence systems in that state.  The law, which is similar to Colorado’s, addresses the obligations of developers and deployers and also requires notification to users of the existence of such systems by certain deployers.  It also establishes the Texas Artificial Intelligence Council that is charged with oversight and enforcement of the law. 

Finally, Illinois has also passed a law similar to California; this new law amends the Illinois Human Rights Act and specifically regulates the use of artificial intelligence in employment decisions.  Under the IHRA amendments, employers may not use artificial intelligence in recruitment, hiring, promotion, renewal of employment, selection for training or apprenticeship, discharge, discipline, tenure, or the “terms, privileges, or conditions of employment” where the artificial intelligence has the effect of discriminating against employees on the basis of classes protected by the IHRA. In addition, employers may not use zip codes as a proxy for protected classes. The law also requires employers that use artificial intelligence in a manner regulated by the IHRA amendments to notify employees that they are using artificial intelligence for one or more of those purposes.

These new laws are an important reminder that, while tools that rely on artificial intelligence exist to help human resources professionals carry out the responsibilities of their role, compliance with state and federal laws cannot be outsourced. When using applicant software systems or other human resources systems, the employer must ensure that those systems do not violate the law.  Regular audits of the system must be conducted and reliance on assurances by the software developer are insufficient to defend against any claims of discrimination or other violations of the law.  Even in an AI world, the buck stops with the employer!  MyHRcounsel can assist you in navigating these new regulations.