A federal judge has determined that Workday Inc must answer claims that its artificial intelligence-powered human resources software screened out job applicants in ways that may violate California law and federal disability discrimination protections. U.S. District Judge Rita Lin in San Francisco issued the ruling on Monday.
In rejecting Workday’s contention that California’s anti-discrimination statutes do not reach screening of applicants who are based outside the state and seeking work in other states or countries, the court emphasized the company’s alleged participation in unlawful conduct from its California headquarters. Because the complaint alleges activities originating in California, Lin concluded the company could be held liable under state law.
The litigation began with a proposed class action filed in 2023 and is notable for being the first broad challenge aimed at the algorithmic decision-making embedded in AI screening tools that have become common among large employers. Lin initially denied Workday’s attempts to dismiss the case in 2024. Monday’s decision mostly rebuffed the company’s efforts to remove recent amendments to the complaint.
The judge also refused to dismiss a claim asserting that Workday’s software can exclude applicants based on proxy indicators of disability or illness. The complaint alleges that features such as gaps in employment history can operate as stand-ins for medical conditions, potentially running afoul of the federal Americans with Disabilities Act.
At the same time, Lin dismissed a specific allegation that the software discriminated against Asian American applicants because the plaintiffs failed to follow proper procedure to add that claim to the lawsuit. The plaintiffs otherwise allege parallel claims that the tools discriminated against Black job seekers, women and people older than 40.
The use of automated screening tools is widespread. According to surveys cited in the complaint, more than 80% of U.S. employers and nearly all Fortune 500 companies now use AI tools similar to those produced by Workday in hiring processes. Government agencies and worker advocacy groups have raised concerns that AI-driven hiring systems can reproduce or amplify existing biases when they are trained on data that reflects historical disparities.
Key points
- Judge Rita Lin ruled Monday that Workday can be sued under California anti-discrimination law because the company allegedly engaged in conduct from its California headquarters.
- The court preserved a federal Americans with Disabilities Act claim that the software can screen out applicants using proxy indicators of disability, such as employment gaps.
- The proposed class action, filed in 2023, represents the first broad legal challenge to algorithmic hiring systems used by large employers.
Risks and uncertainties
- Ongoing litigation creates legal and compliance risk for HR technology providers and the employers that deploy such systems.
- Regulatory and reputational exposure remains uncertain as the case proceeds, including how claims related to proxy indicators of disability will be adjudicated.
- Procedural issues can limit certain claims, as demonstrated by the dismissal of the allegation concerning Asian American applicants for failure to follow proper amendment procedures.