Employers are rapidly adopting AI tools to screen resumes, analyze interviews, and assess candidate skills. Simultaneously, state legislatures, regulators, and plaintiffs’ lawyers are reshaping the legal landscape governing these tools. As organizations use AI to evaluate far more applicants than traditional processes allow, they face heightened legal scrutiny and rapidly evolving regulations, with several new laws taking effect in 2026 and 2027, and litigation against both employers and AI vendors continuing to accelerate.
AI Adoption in Hiring Continues to Accelerate
AI‑powered hiring tools have become significantly more sophisticated, with developers designing systems to assist employers with the following:
- Review and rank large volumes of resumes
- Conduct or analyze video interviews
- Administer cognitive, personality, skills, and job‑knowledge assessments
- Evaluate situational judgment and job‑fit
- Predict candidate success and retention
These tools continue to improve as vendors focus more closely on job-relatedness, validation, and discrimination risk. As a result, employers can process and evaluate far more candidates than traditional human-only workflows allow.
Federal Activity: Limited but Not Quiet
Under the current administration, the federal government has signaled a deregulatory position toward AI, emphasizing innovation and “unfettered development.” As a result, most meaningful regulation is occurring at the state and local levels.
EEOC Activity
Although the EEOC has repeatedly stated that AI fairness is a priority, public enforcement activity remains limited. Indeed, iTutorGroup remains the EEOC’s only public AI‑related settlement, reached in 2023. In iTutorGroup, the EEOC alleged that the company programmed its screening software to automatically reject women 55+ and men 60+. The case settled for $365,000, with the respondent company denying wrongdoing.
Litigation Trends
Two cases, Mobley v. Workday and Kistler v. Eightfold, are helping shape the future of AI liability:
- Mobley v. Workday (N.D. Cal. 2023) alleges that Workday’s AI-based applicant screening tools discriminate against applicants based on race, age, and disability. In May 2025, the court granted preliminary certification of a nationwide ADEA collective action, and in March 2026, the court rejected Workday’s argument that the ADEA’s disparate-impact protections do not apply to job applicants. The case is now in discovery and may become a landmark decision on whether AI vendors can be held liable as agents of employers.
- Kistler v. Eightfold (N.D. Cal. 2026) alleges FCRA and ICRAA violations arising from AI-generated “consumer reports,” signaling new liability theories beyond discrimination. The proposed class action alleges that the platform generated consumer reports without providing the disclosures, consent, and dispute rights required by federal and California law. The proposed class includes all U.S. residents evaluated by the tool, which was allegedly used behind the scenes by major employers. The case is in the early pleading stage, with a pending motion to dismiss.
These highlight the expanding litigation theories—disparate impact, proxy discrimination, and now consumer‑reporting violations.
State Law Landscape: A Rapidly Expanding Patchwork
State laws governing AI in hiring are expanding rapidly, with jurisdictions imposing notice, consent, bias-audit, and anti-discrimination requirements on employers that use automated tools. Illinois, Maryland, New York City, California, Colorado, New Jersey, and Texas each take different approaches, creating a complex patchwork that requires careful compliance planning and ongoing monitoring as new bills emerge.
Key themes across states include:
- Notice to applicants or employees when AI is used
- Consent for certain AI‑based evaluations
- Bias audits or risk assessments
- Restrictions on discriminatory or proxy‑based outcomes
- Data retention or deletion obligations
New York City remains the most stringent, requiring independent bias audits, public posting of results, and a 10‑day candidate notice. California’s FEHA and CCPA regulations impose broad restrictions on automated decision systems and require risk assessments and detailed pre‑use notices. Colorado’s 2027 AI Act adds consumer‑style rights and adverse‑action notices. Meanwhile, states like Texas take a lighter approach, prohibiting only intentional discrimination.
Another emerging trend involves “ghost job ads,” with New York leading efforts to require employers to disclose hiring timelines or clarify when postings are intended for future pipelines. New Jersey, California, and Pennsylvania are considering similar measures.
Practical Steps for Employers
As AI tools and the legal landscape continue to evolve, employers should consider the following:
- Inventorying all AI tools used in hiring
- Updating notices and consent processes
- Conducting or obtaining bias audits where required
- Reviewing vendor contracts for audit rights, indemnification, and data‑handling support
- Implementing retention and deletion protocols
- Monitoring new state legislation and local enforcement activity
If you have any questions about navigating the latest developments in AI and how they may impact the legal landscape, please contact Kate Campbell, Sonya Rosenberg, or your Neal Gerber Eisenberg attorney.
The content above is based on information current at the time of its publication and may not reflect the most recent developments or guidance. Neal, Gerber & Eisenberg LLP provides this content for general informational purposes only. It does not constitute legal advice, and does not create an attorney-client relationship. You should seek advice from professional advisers with respect to your particular circumstances.
