Artificial Intelligence (AI) has taken the world by storm as the software is creating new art, answering our burning questions, and even solving our children’s most difficult homework problems (I know I can’t help them with their calculus assignments). Many employers have voyaged into this new frontier with clear eyes and full hearts, using AI in hiring, performance evaluation, and automation. But should employers slow down and consider the legal ramifications of adopting this new and evolving technology? The Equal Employment Opportunity Commission (EEOC) sure thinks so. 

On August 9, 2023, the EEOC filed a consent decree in federal court settling the first-ever AI discrimination lawsuit requiring tutoring company, iTutorGroup, Inc., to cough up $365,000. 

The Lawsuit

On May 5, 2023, the EEOC filed suit on behalf of over 200 applicants alleging iTutorGroup—an English-language tutoring company—“programmed their application software to automatically reject female applicants over the age of 55 and male applicants over the age of 60.” The company’s website required applicants to input their date of birth. One female applicant over the age of 55 was initially rejected but suspiciously received an interview after she reapplied with an identical resume but more recent birth date. The applicant filed a charge with the EEOC claiming age discrimination. Upon further investigation, the EEOC alleged the company discriminated against over 200 applicants based solely on age. 

iTutorGroup continues to deny the allegations but agreed to resolve the lawsuit through the $365,000 settlement. Along with the payout, the company must adopt anti-discrimination policies, conduct training on equal employment opportunity laws, and reconsider all applicants rejected due to age. 

This settlement is significant as it illustrates the EEOC’s increasing enforcement and interest in AI. Although the digital world is the next great frontier, there are many tech traps that employers need to navigate when using new software. 

Legal Lessons

1. Beware of Algorithm Bias

Although the iTutorGroup settlement dealt with alleged intentional discrimination, unconscious algorithm bias is a greater concern for employers. Algorithm bias occurs where AI-powered software used to auto-screen resumes unintentionally screens out applicants of a particular protected category based on the data entered and how the software processes that data. For example, in a case pending in the Northern District of California, an applicant is alleging a company’s AI software rejects African American, disabled, and older applicants at a disproportionate rate constituting a “pattern and practice of discrimination.” Employers may be liable for unintentional algorithm bias and should work with any third-party providers to better understand how their AI software works. 

2. Stay Apprised of Legal Developments

Employers should stay apprised of legal developments, including developing case law, EEOC technical guidance, and statutes or regulations. For example, in May of 2022 and 2023, the EEOC released technical guidance on using AI in hiring under the Americans with Disabilities Act and Title VII, respectively. States are also beginning to regulate the use of AI. Illinois requires transparency and consent to use AI technology when analyzing an applicant’s video interview. Similarly, Maryland prohibits the use of facial recognition technology during job interviews without the applicant’s consent. Meanwhile, New York City requires employers to conduct bias audits on any AI used in hiring or promotions and publish the results on their company website. 

3. Keep the “Human” in Human Resources

Employers should ensure they are not sacrificing the human element when automating part of the workplace. Employees benefit from having a human being that can answer questions, follow-up on complaints, and even explain how AI is being used. Employers should avoid endless screens of ‘high-tech’ automated responses when employees often just want to speak with a person. 

4. Adopt AI Policies

Finally, employers should implement clear policies explaining how and when AI may be used in the workplace. These policies may strictly prohibit the use of AI, regulate limited use, and/or set forth guidelines for monitoring use, among other things. Suggestions for developing a strong AI policy can be found in this helpful article. 

If you have questions about this case or need any assistance modifying your policies, please contact Phillip Jones or any other attorney in our Workplace Solutions Group.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.