Archived: Workday must face novel bias lawsuit over AI screening software

July 15 (Reuters) - A federal judge in California has rejected Workday's bid to dismiss a proposed class action claiming that the artificial intelligence-powered software the company uses to screen out job applicants for other businesses bakes in existing biases.

In the first ruling of its kind, U.S. District Judge Rita Lin on Friday said that Workday could be considered an employer covered by federal laws banning workplace discrimination because it performs screening functions that its customers would normally carry out themselves.

Lin refused to dismiss several claims in a 2023 lawsuit by Derek Mobley, who says he was passed over for more than 100 jobs at companies that contract with Workday because he is Black, older than 40 and has anxiety and depression.

The case is the first proposed class action to challenge the use of AI screening software, and could set important precedent on the legal implications of using AI to automate hiring and other employment functions, which most large companies are now doing.

Lin dismissed claims that Workday intentionally discriminated based on race and age. She also ruled that the company cannot be considered an "employment agency" under anti-bias laws because unlike a staffing firm, it does not procure job opportunities for workers.

A Workday spokesperson in a statement said the company was pleased that Lin tossed out some of the claims.

"We're confident that the remaining allegations will be easily refuted as we move to the next phase where we’ll have an opportunity to directly challenge their accuracy," the spokesperson said.

Lawyers for Mobley did not immediately respond to a request for comment.

The lawsuit claims Workday uses data on a company's existing workforce to train its AI software to screen for the best applicants without accounting for the existing discrimination that it may reflect.

Mobley has accused Workday of race, age and disability discrimination in violation of Title VII of the Civil Rights Act of 1964 and other federal anti-discrimination laws. The proposed class could include hundreds of thousands of people.

Workday says it is not covered by workplace bias laws because it was not Mobley's prospective employer and is not an employment agency that can be held liable for discrimination, since it does not make hiring decisions for its customers.

But Lin on Friday said anti-bias laws were designed to broadly protect workers and prevent employers from farming out tasks such as screening applicants in order to escape liability, and that Workday could be held liable as an agent of its customers.

"The (lawsuit) plausibly alleges that Workday’s customers delegate traditional hiring functions, including rejecting applicants, to the algorithmic decision-making tools provided by Workday," wrote Lin, an appointee of Democratic President Joe Biden.

The U.S. Equal Employment Opportunity Commission, which enforces federal laws banning workplace discrimination, had urged Lin to let the case proceed in an April brief. The agency has warned employers that they can be held legally liable if they fail to prevent screening software from having a discriminatory impact.

The case is Mobley v. Workday Inc, U.S. District Court for the Northern District of California, No. 3:23-cv-00770.

For Mobley: Lee Winston and Roderick Cooks of Winston Cooks

For Workday: Julie Totten of Orrick, Herrington & Sutcliffe

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Reporting by Daniel Wiessner in Albany, New York

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