US Court Rules Against Workday in AI-Powered Hiring Software Lawsuit

A US federal court ruled that Workday must face a lawsuit that challenges how its artificial intelligence-powered hiring software screens job applicants, reported Reuters. US District Judge Rita Lin in San Francisco rejected Workday’s statement that California’s anti-discrimination laws should not apply when its software is used to evaluate job applicants outside the state. The lawsuit, filed in 2023, targets Workday’s AI-based recruitment tools that are widely used by large employers to filter job applications, reported Reuters. Plaintiffs claim the system automatically rejects candidates in ways that can discriminate against protected groups, including people with disabilities, Black job seekers, women and older applicants. Judge Lin ruled that Workday could be held liable because the company is based in California and allegedly contributed to the development and deployment of the system from the state. She also allowed claims under the federal Americans with Disabilities Act to proceed, including allegations that the software may reject applicants using “proxy indicators” such as employment gaps that could relate to illness or disability, reported Reuters. However, the judge dismissed one part of the case that alleged discrimination against Asian American applicants, saying the plaintiffs did not follow proper legal procedures to include that claim. Workday has denied all allegations and said its AI tools do not make hiring decisions based on race, age or disability. The company said its systems are designed to evaluate job qualifications rather than personal traits. “Our technology looks only at job qualifications, not protected traits like race, age, or disability,” a Workday spokesperson said, as reported by Reuters. The company also said it tests its products under its Responsible AI program to ensure fairness and reduce bias. Workday also rejected claims that its software makes hiring decisions in California or elsewhere, saying that it only provides tools used by employers during recruitment. According to Reuters report, more than 80 percent of US employers use some form of AI in hiring, including many Fortune 500 companies. Experts say AI systems can highlight biases present in the data used to train them, which may lead to unfair outcomes for certain groups of applicants. At the same time, few lawsuits have been filed so far, partly because job seekers often do not know when AI tools are used in the hiring process. The ruling in the Workday case allows the lawsuit to move ahead and could set an important precedent for how courts treat AI-based employment decisions in the future.