Workday, the California-based HR software maker behind AI recruiting tools used by major employers, failed to dismiss key claims in a proposed class action accusing its recruiting software of helping filter out candidates in ways that may violate anti-discrimination laws.
U.S. District Judge Rita Lin in San Francisco ruled Monday that the case can move forward, rejecting Workday’s argument that California’s anti-discrimination laws should not apply to applicants outside the state who were seeking jobs elsewhere in the United States or overseas, Reuters reported.
The ruling does not indicate that Workday discriminated against job seekers. Rather, it simply means the plaintiffs can keep pursuing claims that Workday’s AI screening software played a role in hiring practices that allegedly harmed disabled applicants, Black job seekers, women and people older than 40.
Judge rejects Workday’s California defense
In its bid to dismiss the lawsuit, Workday argued that it could not be held liable under California law for screening applicants who were not based in California and were applying for jobs outside the state.
Lin rejected that argument, finding that the company could still face claims because the alleged conduct was tied to Workday’s operations from its California headquarters.
The lawsuit, filed in 2023, is among the first major cases to challenge the algorithmic decision-making behind AI hiring tools. Its progress could influence how courts treat future claims against companies that build, sell or operate automated screening systems for employers.
Disability claim puts AI filters under scrutiny
A central part of the ruling focused on claims under the federal Americans with Disabilities Act. Lin allowed the plaintiffs to move forward with allegations that Workday’s software may have screened out candidates through “proxy indicators” of disability or illness.
That means the software did not need to directly identify a person as disabled to raise legal concerns.
The plaintiffs argue that factors such as gaps in employment history could act as indirect signals tied to disability or medical conditions, potentially causing qualified applicants to be rejected unfairly.
Workday says its tools do not make hiring decisions
Workday denied the allegations as false, saying its AI recruiting tools do not make hiring decisions “in California or anywhere else.”
“Our technology looks only at job qualifications, not protected traits like race, age, or disability,” Workday said, adding that it tests products through its Responsible AI program to confirm the tools “do not harm protected groups.”
The case now moves deeper into litigation, raising the stakes for AI recruiting software makers as courts begin testing who can be held responsible when automated recruiting tools are accused of steering applicants out of the hiring process.
