Workday AI Bias Case Tests EEOC Definition of Employment Agency

The EEOC’s decision to file a brief in support of a plaintiff who alleged Workday Inc.’s artificial intelligence-based hiring tools discriminated against him and other job seekers has sparked widespread skepticism about the agency’s position that software vendors, rather than just employers, can be liable in these bias cases.

The US Equal Employment Opportunity Commission has said targeting AI-related discriminatory recruitment and hiring practices is high on its enforcement priority list, and has brought at least one lawsuit over the technology, in addition to issuing a technical assistance document for employers. However, its efforts to prove AI tool vendors are “employment agencies” under federal civil rights laws may face long odds in court, and the EEOC’s five-member commission seems to be in disagreement internally on the issue.

The EEOC’s recent amicus brief expands the traditionally-held definition of “employment agency” and steps beyond the commission’s existing guidance on AI bias. Its technical assistance only went so far as to say employers may be held liable when a vendor is involved in discriminatory hiring.

An April 23 filing from Workday slammed the EEOC’s brief in the California federal court litigation, saying the commission is “armed with no case, no statutory language, and no guidance” in asserting a theory of vendor liability in the race and disability bias suit. Plaintiff Derek Mobley, who is Black, over 40, and suffers from mental illness, said he had applied to 80-100 jobs and been denied employment each time due to Workday’s biased screening tools, though his suit doesn’t name employers.

Dan Kuang, a BCGI distinguished fellow and researcher at Biddle Consulting Group, said even though he thinks companies like Workday are “absolutely swimming” in algorithmic bias, “you can’t go after a vendor.”

“No way,” said Kuang, who has worked with hiring algorithms and tests. “It’s the employer that’s on the hook, in almost all cases I’ve worked on. It’s the user of the gun, not the manufacturer.”

Commission Vote

Judge Rita F. Lin of the US District Court for the Northern District of California said in a January ruling on Workday’s initial motion to dismiss that Mobley’s suit lacked enough detail to hold Workday liable as an “employment agency,” and didn’t prove that Workday was “significantly involved enough in procuring employees.” She allowed Mobley to revise his race, age, and disability bias complaint, and Workday followed with a new bid in March to get the amended suit tossed.

In what appears to be its first-ever amicus brief dealing with bias in AI, the EEOC didn’t take a position on the legal merits of Mobley’s claims. But it said in its April 9 brief he has plausibly claimed the company could be liable under Title VII of the 1964 Civil Rights Act, the Age Discrimination in Employment Act, and the Americans with Disabilities Act.

Workday plausibly qualifies as an employment agency and an indirect employer because its screening tools review candidates’ applications or resumes and evaluate if they’re suited for a job opening and should be recommended for further consideration by employers, the brief said.

But the EEOC’s decision to define vendors such as Workday this way in the amicus brief wasn’t agreed upon among commissioners, according to a source close to the agency.

The decision to file the brief was based on a 3-2 vote, with Republican commissioners Andrea Lucas and Keith Sonderling dissenting, the source said.

In slides from a March 28 EEOC webinar provided to Bloomberg Law, agency regional office staff giving the presentation also presented a different take on the vendor liability issue from the amicus brief.

The lesson of the Workday case is “if your company uses software, computer systems, etc., created by someone else that discriminates, you will be on the hook, not the vendor,” one slide said.

“The webinar’s discussion of the Mobley v. Workday litigation was limited to describing the parties’ arguments and the District Court’s decision on Workday’s motion to dismiss the original Complaint. The speaker was not discussing the agency’s position,” EEOC spokesperson Victor Chen told Bloomberg Law in a statement.

Advancing Goals

The agency’s technicial assistance document on AI in employment selection says “employers may be held responsible for the actions of their agents, which may include entities such as software vendors,” even if the vendor is incorrect about whether its tools lead to disparate impact or disparate treatment discrimination.

Workday pointed to the document in its response to the EEOC brief, saying its guidance and training materials “make it clear it never contemplated a software provider would be liable” under facts like those found in the Mobley case.

A statement from a Workday spokesperson said the company doesn’t “have oversight or control of our customers’ job application processes” and customers “do not delegate control to us.”

Rachel See, a labor and employment attorney focusing on AI at Seyfarth Shaw LLP, said filing amicus briefs and litigation is a way for the EEOC to advance goals without having the time restrictions of guidance that is subject to public comment and subsequent revision.

“The EEOC has used its amicus and litigation program to move the law forward in the past,” said See, who is a former EEOC assistant general counsel for technology. “In some cases, some of them controversial, the EEOC’s litigation program has gotten ahead of issuing guidance or technical assistance.

“We last saw this really in spades back in 2014 when the litigators, the EEOC, filed to challenge wellness programs, and that was litigation that was filed before the EEOC issued guidance,” she said.

The EEOC finalized its wellness rules in 2016 only to have them partially vacated. The EEOC published new proposed rules and then revoked them in 2021.

‘Employment Agency’

Frida Polli, CEO and co-founder of Pymetrics, a startup which uses AI to evaluate job skills through online assessments, said that in her experience as a former vendor these companies have “a tremendous amount of responsibility for the algorithms they build.”

If Workday is held liable and found violating federal antidiscrimination laws, Polli said the company may have to make changes to its algorithms.

However, proving the theory of liability the EEOC has advanced will be difficult, employment attorneys say.

One key barrier is how the definition of “employment agency” applies to HR technology companies, as the term has often been used under Title VII or ADA case law to refer to more traditional, lower-tech entities.

The EEOC’s recent brief presented its view that the term that often refers to hiring or staffing agencies applies to AI tools like Workday that “perform precisely the same screening and referral functions as traditional employment agencies—albeit by more sophisticated means.”

But Judge Lin laid out her own view on the matter in dismissing Mobley’s original complaint as it failed to adequately claim that “Workday helps recruit and select applicants.”

The claims would fail as they don’t fall under the Title VII and ADA definitions of “employment agency” since these laws require the entity to regularly “procure employees” for an employer and Mobley had provided few details on Workday’s involvement in this process, she said.

The lawsuit also didn’t include allegations regarding whether companies that use Workday’s tools rely on their specific “criteria, Workday’s own algorithm(s), or some combination of the two,” Lin said.

Biddle’s Kuang said Workday could make the argument that an employer’s involvement in deciding how to use its hiring tools means the employer itself should be held accountable for any adverse impact.

Employers often work with software vendors such as Workday to determine which qualifications an applicant must meet to get past the initial hiring barrier, based on factors such as how high they score on a test provided through the HR software or based on keywords in their resume. Vendors could point to this as proof that the employer is exclusively liable for any bias that arises as a result of these cutoffs, Kuang said.

Once the case makes it past the motion to dismiss stage, the more evidence vendors are able to present that they are simply providing the employer with hiring tools, “the harder its going to be to tag the vendor, even under an expansive view of the definition of employment agency under Title VII and other laws,” See said.

But regardless of the difficulty of litigating these cases, the EEOC’s brief has put vendors on notice that there’s a will to do so.

“The official government position is that developers are not going to be insulated from liability. You can’t just sell a solution to a customer and wash your hands of that,” Goltz said.

The case is Mobley v. Workday, Inc., N.D. Cal., No. 3:23-cv-00770, amicus brief filed 4/9/24.