Discrimination Lawsuit Against AI-Powered Hiring Tool Developer Allowed to Proceed to the Merits
Kathryn Bennett, Law Clerk
On July 12, 2024, the United States District Court for the Northern District of California ordered that Mr. Derek Mobley’s employment-related lawsuit against Workday, Inc. (“Workday”) could proceed past the pleadings stage—notwithstanding that Workday was not Mr. Mobley’s employer, but rather a developer of an artificial intelligence (“AI”)-based employment and resume screening platform. Mobley v. Workday, Inc. presents an intriguing case study concerning the use of AI-based technologies in employee hiring and recruiting and the potential legal perils associated with the same under federal anti-discrimination laws.
Mobley v. Workday, Inc. – Background and Procedural Posture
In his First Amended Complaint (“FAC”), Mr. Mobley alleged that Workday discriminated against him based on race, age, and disability in violation of Title VII of the Civil Rights Act of 1964 (“Title VII”); Section 1981 of the Civil Rights Act of 1866); the Age Discrimination in Employment Act; and the Americans with Disabilities Act. Mr. Mobley alleged that not only does Workday’s algorithmic screening tools result in disparate impact discrimination in the recruiting process based on age, race, and disability, but also that Workday committed intentional, disparate treatment discrimination while acting as an “employment agency” or otherwise acting as an agent of potential employers who utilize Workday’s platform.
Workday moved to dismiss Mr. Mobley’s FAC in its entirety for failure to state a claim upon which relief could be granted. In particular, Workday challenged its status as an “employer” under the anti-discrimination statutes and alternatively argued that, even if it were an employer under an agency theory, Mr. Mobley did not adequately allege Workday’s intent to discriminate. As part of the parties’ briefings, the Equal Employment Opportunity Commission submitted an amicus brief in support of Mr. Mobley’s arguments that Workday was an employment agency because it performed activities “classically associated” with employment agencies; or, alternately, that Workday otherwise acted as an agent of the participating potential employers.
The Court’s Decision
As an initial matter, the Court found that Mr. Mobley alleged plausible claims for disparate impact discrimination based on his allegations that Workday’s screening tools disproportionately screened candidates with protected characteristics. However, the issue of Workday’s status as an employer under an agency theory or as an “employment agency,” as well as Mr. Mobley’s allegations of Workday’s alleged intent to discriminate, required further analysis.
In considering Workday’s status as an employer, the Court rejected Mr. Mobley’s theory that Workday was an “employment agency” because he failed to plausibly allege that Workday was actively in the business of procuring potential employees for other employers. Rather, because Workday’s AI tools screened potential applicants from employer hiring pools (as opposed to actively finding or soliciting candidates for employers), Workday did not constitute an employment agency.
However, the Court did find that Mr. Mobley plausibly alleged Workday’s status as an agent of the employers that used its screening tools, because those employers delegated key, traditional employment functions to the platform—specifically hiring and screening decision processes. The Court saw no reason to treat Workday differently because the employment-related decisions were being made by artificial intelligence rather than an actual person or persons. Thus, to the extent Workday’s motion to dismiss was premised on its lack of agency, the Court denied the same.
Ultimately though, Mr. Mobley’s disparate treatment discrimination claims were dismissed with prejudice because a critical element to the claims—intent—was missing from the allegations in the FAC. In particular, the Court found that while Mr. Mobley certainly alleged that Workday’s hiring and screening tools had a disparate impact on members of certain protected groups, there were insufficient allegations that Workday intended such a result. In particular, the Court noted that even if Workday were aware that its platform caused a disparate impact in the applicant screening process, such awareness would not equate to an inference of intentional discrimination. As noted, however, the disparate impact claims survived and will proceed on the merits.
Employer Considerations
To the extent this suit concerns the use of AI by employers, its outcome may provide insight into the potential liability of entities that screen and refer applicants and make automated hiring decisions on behalf of employers using algorithmic tools. As Mobley demonstrates, such AI platforms may be considered an agent of employers given their role in the hiring and screening process which, at a minimum, could result in liability for disparate impact discrimination. While Mr. Mobley’s disparate treatment claims ultimately fell short at the pleadings stage, the Mobley decision provides a potential roadmap for similar plaintiffs to allege facts demonstrating that not only was an AI developer aware of the impact of its software, but that it intended those discriminatory results. Campbell Litigation will continue to follow and report on future developments in this action and remains available to answer questions concerning use of AI tools in the workplace.