AI Hiring Tools Face Wave of Discrimination Lawsuits

A California class action lawsuit filed in January against Eightfold AI marks a turning point in how workers are challenging the use of artificial intelligence in employment decisions. The case, brought by product manager Erin Kistler after applying unsuccessfully to thousands of positions over four years, argues that automated hiring systems function as undisclosed applicant dossiers that rank candidates without giving them visibility into the process.

Eightfold AI, whose platform is used by hundreds of companies including PayPal, Microsoft, and Netflix, maintains a database of over one billion worker profiles compiled from résumés, LinkedIn, and social media. Its AI scores applicants on a scale of zero to five, predicting job performance and potentially determining who receives interviews. The company has denied the allegations and stated it will defend itself vigorously.

Why it matters

These legal challenges could fundamentally reshape employment practices and worker rights in an era when 90 percent of employers now use some form of automation in hiring, according to World Economic Forum data. Without transparency requirements or the ability to dispute algorithmic assessments, candidates may face what researchers call "algorithmic blackballing"—where a negative flag in one system follows them across multiple employers using similar platforms. The outcomes will likely influence whether job seekers gain rights comparable to those they have with credit reports.

Pattern of discrimination claims

The Eightfold case is part of a broader legal trend. Workers have also sued Meta over an internal AI system that allegedly targeted employees for layoffs after they took parental or medical leave. A separate lawsuit against IBM claims AI tools discriminated against older workers. IBM denied using AI to automatically screen candidates and stated it does not tolerate discrimination. Meta did not respond to requests for comment.

"There's actually no law requiring a notice or disclosure of the use of these AI hiring systems," said Ifeoma Ajunwa, professor at Emory University School of Law and founding director of the AI and future of work program. "So companies are not necessarily telling workers when they're being evaluated with AI."

Research reveals amplified bias

Contrary to claims that AI removes human bias, research shows these systems can amplify discrimination. Xuechunzi Bai, assistant professor at the University of Chicago, co-authored a study where AI models made hiring decisions about fictional applicants from made-up demographic groups. The models quickly developed stereotypes unrelated to qualifications, and newer, more advanced models produced decisions with greater bias than older versions.

"The magnitude of bias is even stronger [with AI]," Bai said, comparing algorithmic systems to human hiring managers.

Amazon previously discontinued an AI hiring tool after discovering it downranked women's résumés because the company's historical top performers were predominantly men. Other research has found AI systems scoring candidates with southern accents poorly during voice interviews.

Regulatory response

New York City enacted a law in 2023 requiring employers using automated hiring systems to conduct annual bias audits and notify candidates about the technology's use. Illinois and Colorado have passed similar legislation prohibiting AI tools that result in unlawful discrimination. However, experts note these regulations contain loopholes and don't provide candidates access to their algorithmic profiles.

Rachel Dempsey, an attorney representing Kistler, argues job applicants deserve the same transparency they receive with credit reports—the ability to see what information is being used and dispute inaccuracies.

These details were first reported by The Guardian.