Workday must face claims that its AI-powered human resources software illegally screened out job applicants with disabilities, a federal judge ruled Monday, in a proposed class action that could redefine employer liability for algorithmic hiring tools. The case is the first of its kind to broadly challenge the automated decision-making behind screening software now used by most large US employers.
The lawsuit, filed in 2023, also alleges that Workday's tools discriminate against Black, female, and older applicants. US District Judge Rita Lin in San Francisco had previously rejected Workday's bid to dismiss the case. On Monday, she largely denied the company's latest motion to throw out recent amendments.
Disability discrimination and proxy indicators
Lin allowed a claim under the Americans with Disabilities Act to proceed, finding that the software might weed out candidates based on proxy indicators of disability-such as gaps in employment history-without directly asking about a person's health.
California law reaches beyond state borders
The judge also ruled that California's anti-discrimination laws apply because Workday allegedly made the screening decisions from its California headquarters, even when applicants lived elsewhere and sought jobs in other states or countries.
One claim dismissed on procedural grounds
The judge dismissed a claim that the software discriminated against Asian American applicants, citing a procedural error. The plaintiffs did not follow the correct steps to add that allegation to the lawsuit. The remaining claims over bias against Black, female, and older job seekers are still active.
AI screening tools are nearly universal, but litigation is rare
Surveys show more than 80% of US employers and nearly all Fortune 500 companies use AI tools like Workday's in hiring, a trend that has made AI for Human Resources a focal point for compliance and ethics. Government agencies and worker advocates have raised concerns that such tools can perpetuate bias when built on data that reflects existing inequalities. Yet lawsuits have been uncommon, partly because applicants often do not know when AI is being used and because suing over opaque, algorithm-driven technology presents steep legal hurdles.
Why this matters for HR professionals
This case signals that software vendors-not just employers-can be held liable for discriminatory outcomes from AI hiring tools. HR leaders should audit their screening platforms for proxy discrimination, document how algorithms make decisions, and prepare for greater regulatory attention. For teams building internal expertise, the AI Learning Path for HR Managers covers AI recruitment automation and workforce analytics, equipping professionals to evaluate and govern these systems.
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