According to a lawsuit filed against Eightfold AI, its hiring software gathers information from sources beyond submitted resumes and application materials, including social media, location data, device activity, cookies, and similar tracking. The plaintiffs argue that this process amounts to the creation of a consumer report under the Fair Credit Reporting Act (“FCRA”) and, therefore, applicants must be provided notice and an opportunity to dispute errors (as the FCRA requires). While this lawsuit targets the software company (i.e., not the employers using the software), it stands to reason that employers may eventually find themselves pulled into the fight.
Relatedly, The U.S. Department of Justice recently settled a case with a Virginia IT staffing company over AI-generated job advertisements that excluded U.S. workers from consideration (limiting to applicants with H-1B, OPT, or H-4 visas), in violation of the Immigration and Nationality Act. The DOJ plainly stated that discriminatory practices prompted by a recruiter, a vendor, or an AI tool are illegal.
Business Takeaway: As with many AI-related disputes, the issue may be less about futuristic technology than modern tools bumping up against older legal frameworks. For now, employers using AI in hiring should understand, in practical terms, what it does behind the scenes. Do you know what information is gathered, to the extent data is coming from outside the application itself, and how candidates are evaluated? Even if the Eightfold AI lawsuit does not succeed, it is a useful reminder that convenience, efficiency, and automation do not eliminate compliance risk. Now is a good time to audit your tools with your vendor, and to contact us if you have concerns about your hiring practices.