AI Hiring Tools Becoming a Litigation Target
We are starting to see the inevitable lawsuits challenging the use of artificial intelligence in employee recruiting. This is the beginning of a years-long process in which courts and legislatures will develop the rules around how employers can lawfully use AI in the hiring process, as well as whether they can legally use AI at all. Some employers will have the bad fortune to be the test cases during this period.
Cases filed in the past year put AI-powered applicant screening tools at the center of discrimination claims under Title VII, the ADEA, and the ADA. The plaintiffs are targeting the kind of resume-screening and candidate-ranking tools that staffing firms and employers benefit the most from.
Workday faces a nationwide age discrimination collective
Perhaps the most consequential case is Mobley v. Workday, now pending in the Northern District of California. Derek Mobley and four co-plaintiffs, all over age 40, allege that Workday's AI-powered screening platform used algorithms to compare applicants' resumes against job postings and then provided hiring recommendations that, according to the complaint, systematically buried older candidates. The plaintiffs claim their job applications were denied within mere minutes of submission, suggesting they were automatically flagged and rejected by the software.
The court denied Workday's motion to dismiss, recognizing Mobley's disparate impact claim under the ADEA as plausible, and on May 16, 2025, a federal judge granted preliminary certification, allowing the case to proceed as a nationwide collective action.
The vendor liability angle is what makes this case a landmark. Workday argued it wasn't the employer making the hiring decisions and therefore couldn't be liable. The court disagreed. While the court dismissed the theory that Workday was acting as an "employment agency," it allowed claims that Workday acted as an "agent" of its employer clients to proceed, a ruling with significant implications for both AI vendors and the employers deploying their tools.
The ultimate concern for staffing firms and employers is this: if your vendor is liable, you probably are too.
Sirius xm sued over alleged algorithmic racial impact
Meanwhile, a Detroit man filed a class action against Sirius XM Radio in the Eastern District of Michigan, alleging that the satellite broadcaster's use of iCIMS's AI-powered applicant tracking system discriminated against Black applicants.
According to the complaint (attached below), Harper applied for approximately 150 positions with Sirius XM—IT support, software engineering, and similar roles—and was rejected for all but one. The complaint alleges that iCIMS's AI tools screen and rank candidates based on data points such as educational institutions, employment history, and zip codes that act as proxies for race, intentionally and disproportionately screening out African-American applicants.
The complaint alleges that Harper's 99.3% rejection rate—149 out of 150 applications—despite meeting or exceeding the qualifications for most positions, is evidence of the discriminatory pattern. Harper seeks class certification on behalf of all African-American applicants who applied through iCIMS's platform since January 2024, asserting claims under Title VII and 42 U.S.C. § 1981.
The case is notable for naming the employer—not the vendor—as defendant and for alleging both disparate impact and intentional discrimination simultaneously.
IBM's algorithm allegedly blocked a rehire at 48
In Swanson v. IBM (attached below), filed in the Western District of Texas in May 2026, a 24-year IBM veteran alleges that the company's AI-driven HR screening system blocked him from being rehired after he was terminated at age 48 in what IBM called a "resource action."
The complaint paints an ugly picture. According to Swanson, IBM executives developed a systematic strategy to eliminate older workers and replace them with "early professional hires"—predominantly college-aged recruits. The complaint references internal IBM planning documents that, according to the plaintiff, show executives tracking workforce age metrics and setting targets to increase the percentage of Millennial employees. The complaint also alleges that a former IBM HR executive testified in a prior case that these planning documents "provide insight into IBM's decision-making processes that are still being used today."
After his termination, Swanson applied for positions he allegedly had held successfully for years, with strong performance reviews. According to the complaint, he received an automatic rejection generated by what he describes as AI screening software. The complaint alleges that IBM's discriminatory hiring criteria had been "programmed into its HR screening software" and blacklisted him based on age.
The ACLU takes aim at assessment tools
In a parallel development, the ACLU filed complaints with both the EEOC and the FTC targeting three alleged AI-powered hiring assessment tools developed by Aon Consulting: a personality assessment called ADEPT-15, a video interview platform called vidAssess-AI, and a gamified cognitive test called gridChallenge. The ACLU alleges these tools unfairly screen out people with disabilities and disproportionately disadvantage applicants based on race, and that the developer's marketing claims of being "fair," "bias-free," and "without adverse impact" constitute deceptive trade practices.
The ACLU specifically contends that the video interviewing tool is likely to discriminate based on disability, race, and other protected characteristics because of the AI data the programs rely upon, and that the cognitive test shows troubling score disparities across racial groups.
Critically for employers, the ACLU noted that employers "are legally obligated to ensure that the assessments they use do not discriminate," even when using technologically complex tools provided by third-party vendors.
Disparate impact doctrine is the key
The disparate impact doctrine will be the center of future AI recruiting controversies. This is a 1971 Supreme Court-created legal doctrine holding that a discrimination claim can arise from a facially neutral policy or practice that has an adverse impact on a minority group. Congress incorporated the doctrine into federal law in 1991. The concept has received criticism over the years and been somewhat narrowed by court decisions. However, the basic doctrine remains viable and will be the primary line of attack on AI recruiting tools and those using them. It is likely that one day the Supreme Court will revisit the doctrine, and this month the Justice Department laid the groundwork for just such a move. On June 9, 2026, the DOJ's Office of Legal Counsel released a memorandum opinion finding the EEOC's existing guidelines on Title VII's disparate impact provisions to be unconstitutional:
Ana C. Shields
The DOJ's memorandum is a roadmap for challenging the disparate impact doctrine on constitutional grounds. Perhaps one of the cases in this story will be the one to reach the Supreme Court. In the meantime, employers and staffing firms will be navigating uncharted waters as AI makes its way into the fabric of American businesses.
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