What happened
Staffing Industry Analysts reports that litigation regarding AI in employment is evolving, with courts treating AI-driven decisions similarly to human-based ones. In Mobley v. Workday, a federal court rejected arguments that age discrimination laws do not apply to job applicants and allowed disability claims to proceed, establishing that AI screening tools can expose both vendors and employers to liability. Simultaneously, new lawsuits against IBM and Meta allege that AI systems were used to disproportionately target older workers for layoffs and penalize employees on protected leave through productivity metrics.
Staffing Industry Analysts (SIA) reports that litigation concerning AI in program management is spreading, with courts and regulators treating AI employment decisions much like human-based decisions. The article highlights that the contingent workforce ecosystem can no longer assume liability rests solely with software vendors, nor can vendors assume employers shoulder all responsibility.
In the case Mobley v. Workday, filed in 2023, the plaintiff alleged that Workday’s AI-powered applicant screening tools discriminate against job applicants based on race, age, and disability. In March 2026, the court rejected Workday’s argument that the Age Discrimination in Employment Act’s disparate impact prohibitions do not extend to job applicants. On June 22, the court partly denied Workday’s motion to dismiss, holding that California’s Fair Employment and Housing Act may apply to Workday’s tools even for applicants outside California, and allowing an ADA claim to proceed based on allegations that the tools treat employment-history gaps as a disability proxy.
A separate lawsuit, Kistler v. Eightfold AI, filed in January, raises a novel theory that Eightfold acts as a consumer reporting agency under the Fair Credit Reporting Act (FCRA). The court heard oral arguments on August 4, and a ruling is pending. This case does not depend on proving but rather on whether the AI scoring constitutes a consumer report.
New lawsuits filed against IBM and Meta suggest the next wave of litigation will focus on AI-enabled employee monitoring and termination. The IBM lawsuit, filed in May, alleges that IBM selected older employees for termination and configured applicant tracking systems to prevent older former employees from being rehired. The Meta lawsuit, filed July 13, alleges that AI-assisted productivity metrics and workforce management tools failed to account for approved absences, disproportionately harming employees with disabilities or those on protected leave during a May reduction-in-force.
SIA recommends that employers conduct AI tool audits, update algorithmic impact assessments, and review vendor contracts. The organization notes that the tension between assertive state laws and a federal deregulatory push is unlikely to be resolved soon, making robust programs essential for defending against discrimination claims and regulatory investigations.
Source details: staffingindustry.com ↗
Why it matters
This development is significant because it clarifies that AI vendors cannot shield themselves from discrimination liability by claiming they are merely software providers. For employers, it means that using AI for hiring, performance monitoring, or workforce reduction carries the same legal risks as manual decisions. The rulings suggest that any AI tool that scores or ranks applicants, rather than just applying simple filters, may be subject to federal civil rights statutes. This shifts the burden on companies to audit their AI tools, update vendor contracts, and maintain human oversight to mitigate legal exposure in a rapidly changing regulatory landscape.
The rulings in Mobley v. Workday establish that AI tools that score, rank, or filter applicants may expose both the vendor and the employer-deployer to discrimination liability under federal civil rights statutes. This is a significant shift from previous legal interpretations that might have limited liability to the entity making the final human decision.
For employers, this means that the use of AI in hiring, performance management, and layoffs is not a legal safe harbor. The courts are treating AI decisions as equivalent to human decisions for the purposes of anti-discrimination laws, which requires companies to ensure their AI systems are free from and that they maintain human oversight.
The potential application of the Fair Credit Reporting Act to AI background checks in Kistler v. Eightfold AI could further expand the legal obligations of AI vendors and employers. If the court rules in favor of the plaintiffs, it would create a new precedent for regulating AI in the hiring process, potentially requiring AI vendors to comply with FCRA obligations.
The lawsuits against IBM and Meta highlight the risks of using AI for employee monitoring and workforce reduction. These cases suggest that AI systems can be used to disproportionately target protected groups, such as older workers or employees on protected leave, which could lead to significant legal liability for companies that rely on AI for these decisions.
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Impossibility results in algorithmic fairness (e.g. Kleinberg et al., Chouldechova) show what?
What to watch next
Watch for the pending ruling in Kistler v. Eightfold AI, which could establish precedent for applying the Fair Credit Reporting Act to AI background checks. Additionally, monitor the discovery phase in Mobley v. Workday, as the court has ruled that factual data on AI tool performance is discoverable. Employers should also prepare for state-level automated decision-making rules that may impose stricter compliance requirements than federal standards.
The pending ruling in Kistler v. Eightfold AI is a key development to watch, as it could establish precedent for the use of AI in background checks and the application of the Fair Credit Reporting Act to AI tools.
The discovery phase in Mobley v. Workday is also important, as the court has ruled that factual data on AI tool performance is discoverable. This could provide valuable insights into how AI tools are being used in the hiring process and whether they are biased.
Employers should also watch for state-level automated decision-making rules, which may impose stricter compliance requirements than federal standards. The tension between state and federal regulations is unlikely to be resolved soon, so companies need to be prepared to comply with a patchwork of laws.
Finally, companies should monitor the development of programs, as these will be essential for defending against discrimination claims and regulatory investigations. SIA recommends that employers conduct AI tool audits, update algorithmic impact assessments, and review vendor contracts to ensure compliance.