Why This Story Matters:
In October 2023, U.S. President Joe Biden issued an Executive Order to ensure that America leads the way in managing the risks of Artificial Intelligence (AI). In addition, one state has passed – and several states have proposed – an AI employment discrimination law. Employers using background screening need to know more about AI employment discrimination laws.
UPDATE: In August 2024, Illinois passed a law to protect employees against discrimination from the use of Artificial Intelligence (AI) in employment-related decisions. For more information, please read the ClearStar blog “Illinois Passes Artificial Intelligence (AI) Employment Discrimination Law” published on September 4, 2024.
White House Issues Executive Order on Artificial Intelligence (AI)
On October 30, 2023, United States President Joe Biden issued a landmark Executive Order on Safe, Secure, and Trustworthy Artificial Intelligence “to ensure that America leads the way in seizing the promise and managing the risks of Artificial Intelligence (AI).” The Executive Order builds on previous actions to drive the safe, secure, and trustworthy development of AI.
“The Executive Order establishes new standards for AI safety and security, protects Americans’ privacy, advances equity and civil rights, stands up for consumers and workers, promotes innovation and competition, advances American leadership around the world, and more,” a Fact Sheet about the Executive Order stated. The Order directed several actions, including:
- Develop standards, tools, and tests to help ensure that AI systems are safe, secure, and trustworthy.
- Address algorithmic discrimination.
- Ensure fairness throughout the criminal justice system.
- Advance the responsible use of AI.
- Develop principles and best practices to mitigate the harms and maximize the benefits of AI for workers.
While no federal legislation addressing AI-based discrimination in employment has been proposed, the Executive Order directs the Federal Government to “enforce existing consumer protection laws and principles and enact appropriate safeguards against fraud, unintended bias, discrimination, infringements on privacy, and other harms from AI.”
Irresponsible uses of AI can lead to and deepen discrimination, bias, and other abuses. President Biden’s Administration had already taken action by publishing the Blueprint for an AI Bill of Rights. Should the federal government pass regulations on the use of AI systems by employers, they may mirror legislation addressing the same issue at a state level.
Artificial Intelligence (AI) Employment Discrimination Law Passed in States
In May 2024, Colorado became the first U.S. state to pass a law to protect consumers from harm caused by the use of Artificial Intelligence (AI) systems. Colorado Senate Bill 24-205 – also known as the Colorado Artificial Intelligence Act (CAIA) – would regulate the private-sector use of AI systems and impose obligations on employers in the state of Colorado.
The CAIA – which will take effect on February 1, 2026 – applies to Colorado businesses that use AI systems to make employment decisions. Although Colorado is the first state to pass legislation addressing AI-based discrimination, similar bills have been proposed in several other states as well as at the federal level with the President’s Executive Order.
In August 2024, Illinois joined Colorado in passing a law – House Bill 3773 (HB 3773) – to protect employees against discrimination from the use of Artificial Intelligence (AI) in employment-related decisions. HB 3773 – which amends the Illinois Human Rights Act and applies to most employers in Illinois – will take effect on January 1, 2026.
HB 3773 defines “Artificial Intelligence” as a “machine-based system that… infers, from the input it receives, how to generate outputs such as predictions, content, recommendations, or decisions that can influence physical or virtual environments.” AI also includes “Generative Artificial Intelligence” which can produce “outputs that simulate human-produced content.”
Artificial Intelligence (AI) Employment Discrimination Laws Proposed in States
In 2024, legislators in California, Georgia, Hawaii, Illinois, and Washington proposed bills aimed at regulating the use of Artificial Intelligence (AI) systems to make – or to assist an employer in making – employment decisions. More specifically, these bills seek to mitigate the risk of algorithmic discrimination arising from an employer’s use of an AI system.
Several states have proposed legislation addressing “Algorithmic Discrimination” that describes any condition in which the use of an AI system results in differential treatment or impact that disfavors an individual on the basis of protected characteristics such as age, color, ethnicity, disability, national origin, race, religion, veteran status, and sex.
Each of the proposed bills would impose similar obligations onto employers that use an AI system or an Automated Decision Tool (ADT) in making employment-related decisions. ADT means a system that uses AI and has been specifically developed to make – or contribute to making, consequential decisions – including employment decisions.
- California Assembly Bill 2930 would prohibit employers from using ADTs in a discriminatory manner, require employers to perform annual impact assessments of the use of an ADT, and require employers to provide notice to applicants and employees that are subject to the use of an ADT. If passed, the bill will go into effect on January 1, 2026.
- Georgia House Bill 890 would expand existing anti-discrimination laws to prohibit discrimination resulting from the use of or reliance upon AI or ADT and preclude employers from relying upon the use of AI or ADTs as a defense to an allegation of discrimination. The proposed bill does not provide an effective date.
- Hawaii House Bill 1607 would prohibit employers from using ADTs in a discriminatory manner, require employers to perform annual impact assessments of their use of an ADT, and require employers to provide notice to applicants and employees that are subject to the use of an ADT. The proposed bill does not provide an effective date.
- Illinois House Bill 5322 – also known as the “Illinois Commercial Algorithmic Impact Assessments Act” – would require annual impact assessments by employers that use AI systems. If passed, the bill will go into effect on January 1, 2026.
- Washington House Bill 1951 would prohibit employers from using ADTs in a discriminatory manner, require employers to perform annual impact assessments of the use of an ADT, and require employers to provide notice to applicants and employees that are subject to the use of an ADT. If passed, the bill will go into effect on January 1, 2025.
All of these proposed bills regarding AI employment discrimination impose a “duty of reasonable care” on employers to mitigate and assess the risk of algorithmic discrimination arising from their use of AI systems. There are also significant reporting requirements that include direct notifications to individuals who are the subject of a decision made by an AI system.
EEOC Artificial Intelligence (AI) and Algorithmic Fairness Initiative
In 2021, the U.S. Equal Employment Opportunity Commission (EEOC) – which enforces federal laws prohibiting employment discrimination – launched an agency-wide “Artificial Intelligence and Algorithmic Fairness Initiative” to ensure that the use of AI in hiring and other employment decisions comply with federal civil rights laws. As part of the initiative, the EEOC will:
- Issue technical assistance to provide guidance on algorithmic fairness and the use of AI in employment decisions;
- Identify promising practices;
- Hold listening sessions with key stakeholders about algorithmic tools and their employment ramifications; and
- Gather information about the adoption, design, and impact of hiring and other employment-related technologies.
As part of the initiative, the EEOC released the technical assistance document “Assessing Adverse Impact in Software, Algorithms, and Artificial Intelligence Used in Employment Selection Procedures Under Title VII of the Civil Rights Act of 1964” in May 2023 which focused on preventing discrimination against job seekers and workers from AI usage.
The document explains the application of key established aspects of Title VII of the Civil Rights Act of 1964 to an employer’s use of automated systems, including those that incorporate AI. The EEOC is the primary federal agency responsible for enforcing Title VII, which prohibits discrimination based on race, color, national origin, religion, or sex.
While AI systems may offer new opportunities for employers, they also have the potential to discriminate. The goal of the initiative is to guide employers, employees, job applicants, and vendors to ensure that these technologies are used fairly and consistently with federal equal employment opportunity laws. To learn more, visit www.eeoc.gov/ai.
What All U.S. Employers Need to Know About Artificial Intelligence (AI) Laws
Although state legislatures and the federal government only recently began to take on issues arising from the use of AI, including by employers making employment-related decisions, the overwhelming number of proposals addressing these issues suggest that the trend toward regulation of AI systems will continue moving forward rapidly in the United States.
While only Colorado and Illinois have passed laws that regulate an employer’s use of AI systems, employers outside of these states should take note of how regulation at the federal and state levels could impact their use of an AI system or ADTs. In fact, legislators across the nation have also proposed various bills addressing many other issues arising from the use of AI.
What ClearStar Does to Help Employers Comply With Artificial Intelligence (AI) Laws
ClearStar – a global workforce screening company specializing in background checks, drug testing, and occupational health services – helps employers stay up to date with changes in background screening laws that may impact them through blogs, webinars, whitepapers, and a monthly Screening Compliance Update. ClearStar background screening services include:
- Background, Drug, Clinical, and Occupational Health Screening
- Criminal Record Searches at Federal, State, and County Levels
- Sex Offender Registry Searches
- Employment/Education Verifications
- Licenses and Credentialing
- Personal Reference Checks
- Motor Vehicle Record (MVR) Searches
- Social Media Screening
- Civil Record Searches
- Employment Credit Reports
- Employee Monitoring
- Contractor Screening
- Tenant Screening
- Global Searches in 230+ Countries
ClearStar’s numerous certifications help ensure the privacy, security, and confidentiality of consumer data used during the background screening process. The use of Artificial Intelligence (AI) by employers coming under scrutiny was the #1 trend in a “Top Trends in Workforce Screening” white paper researched by ClearStar. To learn more, contact us.
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Thomas Ahearn - Digital Content Editor
Thomas Ahearn is a Digital Content Editor at ClearStar, a leading Human Resources technology company specializing in background checks, drug testing, and occupational health screening. He writes about a variety of topics in the background screening industry including Artificial Intelligence (AI), "Ban the Box," class action lawsuits, credit reports, criminal records, drug testing, Equal Employment Opportunity Commission (EEOC), Fair Credit Reporting Act (FCRA), identity theft, privacy, social media screening, and workplace violence.
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