Eightfold AI, a technology firm specializing in AI-based recruitment solutions and backed by venture capital firms such as SoftBank Vision Fund and General Catalyst, has been sued in California for allegedly creating applicant evaluation reports without notifying or obtaining consent from candidates. This legal action, filed on Tuesday, represents the first U.S. lawsuit targeting an AI hiring company on the basis of the Fair Credit Reporting Act, highlighting how consumer protection legislation is being leveraged to regulate AI systems that generate inferences about individuals from large datasets.
Headquartered in Santa Clara, California, Eightfold offers software tools designed to expedite the hiring process by analyzing job seekers and forecasting their compatibility for roles using extensive data sourced from online resumes and job advertisements. However, plaintiffs Erin Kistler and Sruti Bhaumik contend that applicants submitting resumes to companies utilizing Eightfold's platform are not informed about these evaluations and thus lack the opportunity to contest inaccuracies in their profiles.
The proposed class action lawsuit asserts that this absence of notification and dispute resolution mechanisms constitutes violations of the FCRA as well as California statutes granting consumers rights to access and challenge credit-related information used in employment decision-making. The plaintiffs emphasized that existing laws have long safeguarded applicants from data abuses by third-party entities, such as background check providers, that compile and analyze personal information for evaluation purposes. The lawsuit stresses there is no exemption for AI technologies under these regulations.
In response, Eightfold's spokesperson Kurt Foeller stated that their platform's operations rely on data voluntarily shared by candidates or supplied by client companies. He denied the practice of scraping social media or similar sources and emphasized the company's commitment to responsible AI deployment, transparency, and adherence to applicable data protection and employment regulations.
Kistler and Bhaumik brought the suit in California state court, advocating for all U.S. job seekers who have undergone evaluation through Eightfold's tools. They are represented by labor law firm Outten & Golden and nonprofit advocacy group Towards Justice.
The complaint describes how Eightfold compiles talent profiles that incorporate personality traits labels such as "team player" or "introvert," assesses the "quality of education," and predicts prospective job titles and employers. Both plaintiffs hold science or technology degrees and possess over a decade of professional experience. Kistler applied to roles at companies including PayPal, and Bhaumik applied to positions at Microsoft and others. Neither candidate was hired, and they suspect the Eightfold system contributed to these outcomes.
Notably, Microsoft and PayPal are not parties to the lawsuit. Microsoft declined to comment, and PayPal did not provide a response to inquiries. According to Eightfold's website, approximately one-third of its customer base consists of Fortune 500 companies, including Salesforce and Bayer. Additionally, state labor departments in New York and Colorado offer job seeker platforms powered by Eightfold technology.
This lawsuit underscores the emerging challenges of integrating AI systems into hiring workflows amid evolving legal and ethical considerations surrounding data use, transparency, and candidate rights.
Eightfold AI, an artificial intelligence-driven recruitment platform utilized by leading companies such as Microsoft and PayPal, is facing litigation in California. Plaintiffs allege the platform compiled candidate assessments without informing or obtaining consent from job applicants, thereby breaching the Fair Credit Reporting Act (FCRA) and California consumer reporting laws. This case marks a significant test of how existing consumer protection laws apply to AI-powered hiring technologies.
Key Points
- Eightfold AI provides AI-based hiring tools used by major corporations to evaluate job applicants using extensive data without notifying candidates or allowing them to dispute results.
- The lawsuit represents the first U.S. case accusing an AI hiring platform of violating the Fair Credit Reporting Act, applying traditional consumer protection laws to AI models in recruitment.
- Plaintiffs allege that Eightfold compiles detailed candidate profiles with personality and education quality assessments, potentially impacting hiring outcomes without disclosed consent.
Risks
- Potential legal ramifications for AI hiring platforms regarding compliance with consumer reporting laws could lead to broader regulatory scrutiny in the tech and HR sectors.
- Candidate trust and transparency concerns may affect adoption rates of AI recruitment tools across companies, impacting HR technology market growth.
- Ambiguities in AI data practices expose firms to lawsuits and reputational risk, especially those partnering with major corporations employing automated hiring evaluations.