Workday will likely face California claims in sprawling AI bias lawsuit

June 16 (Reuters) – A federal judge has signaled that she will likely order Workday, the maker of popular AI-powered human resources software, to face claims that it violated California law thousands of times by ​weeding out job applicants at many major companies for discriminatory reasons.

During a hearing on Monday, U.S. District Judge Rita Lin in San Francisco appeared to ‌be skeptical of California-based Workday’s claim that it cannot be held liable under the state’s anti-discrimination laws when it screens people based outside California who are applying for jobs in other states and countries.

“So the alternative then is for Workday to be subject to the laws of all 50 states and countries around the world, depending on which employer is deploying its software. Is that really what you’re saying? It seems odd ​to me,” Lin told Kayla Grundy, who represents Workday.

The case is the first of its kind to broadly target the algorithmic decisionmaking underpinning AI screening software that has ​become virtually universal among large employers, and could help shape how such litigation is conducted.

Numerous surveys have found that more than 80% of U.S. ⁠employers, and virtually all Fortune 500 companies, are using AI in the hiring process. That includes using software made by Workday and other firms that can review large numbers of ​job applications and screen out applicants for a variety of reasons.

Government agencies and worker advocates have expressed concerns that AI tools can discriminate against job applicants when they ​are built using data that reflects existing biases.

But there has been little litigation thus far over employers’ use of the tools, which experts have said could be due to many job applicants not knowing when employers use AI software and the complexities of suing over cutting-edge technology.

The proposed class action was originally filed in 2023 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, in violation of federal anti-discrimination laws.

The case has expanded to include three additional named plaintiffs and ​broader discrimination claims, including alleged violations of California’s Fair Employment and Housing Act. Workday has moved to dismiss the entire lawsuit, but Monday’s hearing focused only on whether the FEHA applies to the plaintiffs’ ‌claims.

Grundy told ⁠Lin that Workday’s liability under the California law as an agent of its customers depends on whether each individual customer has broken the law.

Lin pushed back, citing a 30-year-old California appeals court decision that said parties can be directly liable for their own engagement in activities regulated by the FEHA.

“The court’s focus (in that case) appeared to be on where the tortious conduct occurred. What am I missing?” the judge said.

Grundy said there were not sufficient contacts with California when Workday conducts screenings of out-of-state job applicants for employers based in other states.

“When we’re talking about ​a case of this magnitude that implicates decisions ​across all states and potentially even internationally, ⁠there’s no reason that California … can assert itself as the premier law that would apply in all those circumstances,” she said.

Lin did not question Roderick Cooks, who represents the plaintiffs, during the brief time that he spoke. Cooks said courts have made clear that companies like ​Workday can be held liable for any “FEHA-regulated conduct” that takes place in the state.

“We’re just trying to make Workday stand up for ​what it did within California ⁠as far as algorithmic decisionmaking (and) tool developing,” Cooks said.

Lin ruled in 2024 in the first decision of its kind 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, an appointee of Democratic former President Joe Biden, did not say on Monday when she would rule.

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, Kayla Grundy and Erin Connell of Orrick, Herrington & Sutcliffe

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