Artificial intelligence tools that screen resumes, rank candidates, and predict job performance have moved from experimental technology to mainstream hiring practice in just a few years. What has not kept pace is employer awareness of the legal obligations that come with using these tools.
A growing number of states and cities have enacted laws specifically regulating the use of AI in hiring decisions. Employers who use AI screening tools without understanding these requirements face civil penalties, discrimination claims, and regulatory investigations.
Why AI Hiring Tools Create Legal Risk
AI screening tools learn from historical hiring data. When that historical data reflects past discriminatory patterns — intentional or not — the AI can perpetuate and amplify those patterns at scale. An algorithm trained on data from a workforce that is predominantly one gender, race, or age group may systematically score candidates from other groups lower without any human ever making a consciously discriminatory decision.
This is what regulators call algorithmic discrimination — disparate impact caused by automated systems rather than by individual human bias. Federal anti-discrimination law applies to algorithmic discrimination just as it applies to human discrimination. The fact that a computer made the decision does not shield the employer from liability.
New York City Local Law 144
New York City enacted the first major AI hiring law in the United States effective July 5, 2023. Local Law 144 applies to employers and employment agencies that use automated employment decision tools to screen candidates for positions located in New York City.
The law requires employers to:
Conduct a bias audit. Before using an AI hiring tool employers must obtain an independent bias audit of the tool conducted by an independent auditor. The audit must evaluate the tool for disparate impact on the basis of sex, race, and ethnicity.
Publish audit results. Employers must publish a summary of the bias audit results on their website including the date of the audit, the distribution date of the tool, and the bias audit data.
Provide notice to candidates. Employers must notify candidates who are residents of New York City that an automated employment decision tool will be used in the hiring process. This notice must be provided at least ten business days before the tool is used and must include information about the job qualifications and characteristics the tool assesses.
Provide an alternative process upon request. Candidates must be given the opportunity to request an alternative selection process or accommodation if they object to being evaluated by the AI tool.
Penalties for violations range from $375 to $1,500 per violation with each day of non-compliance constituting a separate violation.
Illinois Artificial Intelligence Video Interview Act
Illinois enacted a law specifically addressing AI analysis of video interviews. The Illinois Artificial Intelligence Video Interview Act requires employers who use AI to analyze video interviews to:
- Notify applicants before the interview that AI will be used to analyze their facial expressions, speech patterns, and other characteristics
- Explain how the AI works and what general types of characteristics it uses to evaluate candidates
- Obtain the applicant’s consent before conducting an AI-analyzed video interview
- Limit sharing of video interview recordings to those whose expertise is necessary to evaluate the candidate
- Destroy video interview recordings within 30 days of an applicant’s request
The law applies to any employer that asks applicants to record video interviews and uses AI to analyze those recordings.
Maryland and Other Emerging State Laws
Maryland enacted a law requiring employers to disclose when they use AI or other automated systems to make or assist in making employment decisions. Several other states including California, Washington, and New Jersey have introduced or are actively considering AI hiring legislation as of 2026.
The regulatory landscape in this area is moving extremely fast. What is legal today in a particular state may require new compliance steps within the next legislative session.
Federal Guidance on AI in Hiring
The Equal Employment Opportunity Commission has issued guidance making clear that employers are responsible for the discriminatory impact of AI hiring tools they use — even tools developed and operated by third party vendors.
The EEOC’s position is that if an AI screening tool produces a disparate impact on a protected class the employer — not the vendor — is liable under Title VII and other federal anti-discrimination laws. Employer responsibility is not diminished by delegating the screening function to an outside tool or vendor.
The EEOC recommends that employers who use AI hiring tools:
- Ask vendors for data on the tool’s disparate impact across protected categories
- Monitor the tool’s outputs for patterns of disparate impact on an ongoing basis
- Be prepared to demonstrate that any screening criteria with disparate impact is job-related and consistent with business necessity
The Age Discrimination Risk
The Age Discrimination in Employment Act prohibits discrimination against workers 40 and older. AI hiring tools that deprioritize candidates based on graduation years, years of experience ranges, or other proxies for age may create disparate impact liability under the ADEA even if age is never explicitly considered.
Employers using AI screening tools should specifically audit for age-related disparate impact in addition to the race, sex, and ethnicity categories typically covered by bias audit requirements.
What to Do Before Using an AI Hiring Tool
Before implementing any AI-based screening, ranking, or assessment tool in your hiring process:
Request bias audit data from the vendor. Reputable vendors will have conducted testing for disparate impact across protected categories. Ask for the methodology and results before signing any contract.
Review your legal obligations by location. Determine whether any of the cities or states where you hire have specific AI hiring laws that require disclosure, bias audits, or alternative process options.
Update your privacy notices. If you are collecting biometric data through AI video interview analysis you may have additional obligations under state biometric privacy laws including the Illinois Biometric Information Privacy Act.
Document your decision-making process. If an AI tool is one factor in a hiring decision document how the tool’s output was weighted relative to other factors. This documentation can be critical in defending against a discrimination claim.
AI Hiring Compliance Checklist
- Identify all AI tools currently used in your hiring process
- Determine whether those tools are subject to New York City Local Law 144 or other state-specific AI hiring laws
- Obtain bias audit results from each AI hiring tool vendor
- Implement required candidate notification procedures for covered jurisdictions
- Establish an alternative process for candidates who object to AI screening
- Review AI tool outputs periodically for patterns of disparate impact
- Update employment application and interview consent forms to disclose AI use
- Train HR staff on legal obligations related to AI hiring tools
Key Takeaways
AI resume screening and video interview analysis tools create real legal exposure for employers who use them without understanding the applicable rules. New York City requires bias audits and candidate notification before using automated employment decision tools. Illinois requires disclosure and consent before AI-analyzed video interviews. Federal anti-discrimination law applies to algorithmic discrimination regardless of which party built the tool. Employers are responsible for the disparate impact of AI tools they use even when those tools are provided by third party vendors.
Recommended Resource: Stay ahead of hiring compliance risks with the Ultimate Guide to HR Checklists Edition by Thalheimer & Simikian — 85 step-by-step checklists covering hiring practices, legal risk management, and HR compliance.
Recommended Resource: Stay current on AI screening and state disclosure requirements with professional reference guides from National Underwriter — trusted by HR professionals for regulatory compliance guidance.
Disclaimer: The information on WorkplaceLogic.com is for general informational purposes only and does not constitute legal advice. Employment laws vary by jurisdiction and change frequently. Always consult a qualified employment attorney for advice specific to your situation.
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