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AI in Employment: Rising Adoption and Regulations

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Over recent years, the adoption of various technological tools, including artificial intelligence (AI), has surged in hiring, monitoring work performance, and determining salaries and raises. Employers are increasingly turning to AI due to its numerous advantages, such as streamlining hiring and evaluation processes, enhancing efficiency and accuracy, and reducing costs.

However, using AI also presents significant challenges, particularly the risk of bias against protected classes. AI-based hiring and performance monitoring systems may inadvertently discriminate against certain individuals by failing to consider specific statuses adequately.

Class Action Lawsuit

Hire Image previously reported on a class action lawsuit against a company accused of unlawfully favoring applicants outside of protected classes due to reliance on biased algorithms and inputs. Since these algorithms are created by humans who may have conscious or unconscious biases, those biases can become embedded in the algorithms themselves.

The outcome of this case, along with similar ones, will be crucial not only for future AI and discrimination cases but also for the overall future use of AI in employment-related decisions.

Colorado AI Law

In a landmark move, Colorado recently became the first US state to enact legislation regulating AI. This law mandates that creators and users of high-risk AI systems exercise reasonable diligence to protect consumers from foreseeable algorithmic bias.

Starting February 1, 2026, Colorado will require creators and users of high-risk AI systems to exercise reasonable diligence to protect consumers from identifiable or foreseeable algorithmic bias. Although the legislation is not solely targeted at employers, it covers high-risk AI systems used in employment-related decision-making. The law includes a limited exemption for companies with fewer than fifty employees that do not use proprietary data to train their AI systems.

EEOC AI Law

Additionally, the EEOC issued Technical Assistance clarifying how existing ADA requirements apply to AI in employment decisions. This guidance addresses how AI tools might disadvantage job applicants and employees with disabilities, covering general ADA compliance, reasonable accommodations, avoiding the exclusion of qualified individuals with disabilities, and medical examinations. It also provides recommended practices for employers to ensure ADA compliance when using AI decision-making tools and offers tips for job applicants and employees who believe their rights have been violated.

While many employers will continue to leverage AI tools for their efficiency and cost-saving benefits, it is crucial for them to understand the algorithms’ workings and implications for their decisions. Employers should closely monitor regulatory and legal developments in 2024 and beyond. While technology offers significant benefits, it also poses serious challenges. Employers must stay informed on how to mitigate these risks to protect their organizations.

Employer Guidance

Employers currently utilizing AI in their labor and employment processes should, at a minimum, evaluate and consider whether their existing AI risk management practices comply with current and forthcoming regulations.

Be aware that AI systems can perpetuate biases, both conscious and unconscious, present in their design and data inputs. This can lead to unlawful favoritism and discrimination against protected classes. Ensure that your AI tools comply with all relevant laws and regulations. Conduct extensive legal reviews to avoid potential discrimination and stay informed about new and evolving legal requirements. By taking these steps, employers can better navigate the complexities of AI in employment decisions, promoting fairness and compliance while leveraging the benefits of technological advancements.

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