The Workday AI Hiring Lawsuit: What HR Leaders and Founders Need to Know

Understanding the Landscape Shift in AI Hiring

Artificial intelligence has rapidly transformed hiring practices across industries, with companies increasingly relying on automated tools to screen resumes, rank candidates, and make employment decisions. What began as a promise of efficiency and objectivity has now sparked one of the most significant legal challenges to AI-powered employment practices in U.S. history. At the center of this controversy is Workday, Inc., a major provider of human capital management software used by thousands of companies worldwide. Workday’s platform processes millions of job applications annually through its AI-powered applicant tracking system and recommendation engine, making hiring decisions that affect countless job seekers across virtually every industry.

The lawsuit Mobley v. Workday, Inc. was filed in February 2023 by Derek Mobley, an African American man over 40 with a disability, who alleges that Workday’s AI system systematically discriminated against him and others in protected classes. What started as an individual complaint has evolved into a nationwide class action that could potentially represent “hundreds of millions” of job applicants, according to court filings. The case has drawn intense scrutiny because it challenges fundamental assumptions about AI hiring tools.

For years, many businesses have treated these systems as neutral, objective technologies that simply automate traditional hiring processes. The lawsuit argues instead that these AI systems can perpetuate and amplify discrimination in ways that may be both widespread and difficult to detect. Federal Judge Lucy Koh’s decision in May 2024 to allow the case to proceed as a class action marked a watershed moment. The ruling not only certified the massive scale of potential discrimination claims but also established that AI service providers themselves—not just the companies that use their tools—can be held directly liable for discriminatory outcomes.

For HR leaders and business founders, this case represents more than just legal news. It signals a fundamental shift in how the law views AI hiring tools and the responsibilities of everyone in the hiring ecosystem—from technology vendors to the businesses that rely on their products.

What the Case Reveals

The Core Issues

The Mobley v. Workday case highlights several concerning patterns that could affect businesses across industries. The plaintiff’s experience provides stark evidence of automated decision-making: “Mobley received a rejection at 1:50 a.m., less than one hour after he had submitted his application”. Being rejected from hundreds of positions over seven years illustrates how automated systems can create patterns that raise discrimination questions.

The federal judge’s decision to allow the case to proceed as a nationwide class action suggests these concerns extend well beyond individual complaints. Judge Lucy Koh ruled that “allegedly widespread discrimination is not a basis for denying notice”, even when the potential class involves “hundreds of millions” of members. The court has determined that Workday must face a nationwide collective action that could implicate “hundreds of millions of people” who were rejected for employment through Workday systems.

The court’s willingness to consider AI service providers as potential “agents” liable for discrimination creates a new dynamic where both the technology vendor and the businesses using the tools could share responsibility.

What This Means for Your Business

The traditional assumption that “we just use the vendor’s tool” may no longer provide adequate protection. Businesses are increasingly viewed as active participants in AI-driven hiring decisions, not passive users of neutral technology.

Key Awareness Points for HR Practitioners

Current AI Tool Usage

Take inventory of your existing systems. Many businesses use AI-powered features without fully recognizing them:

• Applicant tracking systems with automated screening
• Resume parsing and ranking tools
• Interview scheduling platforms with candidate scoring
• Social media screening tools
• Video interview analysis software

Understanding what tools you’re currently using is the foundation for assessing potential exposure.

Documentation and Transparency Gaps

Many AI hiring tools operate as “black boxes”—making decisions through processes that aren’t easily explained or documented. This creates challenges when candidates or regulators ask how hiring decisions were made.

Consider whether you can currently:

• Explain to a candidate why they were or weren’t selected
• Provide detailed records of your AI tool’s decision-making process
• Demonstrate that your hiring outcomes don’t disproportionately impact protected groups

Vendor Relationship Dynamics

The lawsuit highlights questions about vendor accountability and client responsibility. Review your current vendor relationships through this lens:

• What testing and validation do your vendors perform for bias and discrimination?
• How do your contracts address responsibility for discriminatory outcomes?
• What level of transparency and control do you have over AI decision-making?

Strategic Considerations for Founders

Risk Assessment Framework

The lawsuit suggests several factors that may influence your risk exposure:

• Volume and Scale: Businesses with high-volume hiring may face greater scrutiny and larger potential class action exposure.
• Industry Context: Technology companies, healthcare organizations, and other industries with diverse applicant pools may face heightened attention.
• Geographic Scope: The nationwide class action status means location doesn’t provide protection from similar claims.
• Tool Implementation: How deeply AI is integrated into your hiring decisions affects both efficiency gains and potential liability.

Resource and Capability Questions

The changing landscape raises important questions about organizational readiness:

• Do you have the HR expertise to properly configure and monitor AI hiring tools?
• Can you dedicate resources to ongoing bias testing and outcome analysis?
• Do you have relationships with employment counsel who understand AI hiring issues?
• Are you prepared for the documentation and audit requirements that may emerge?

Practical Next Steps

Immediate Assessment Actions

• Inventory Your Tools: Create a comprehensive list of all AI-powered hiring technology you’re currently using, including features you may not have considered “AI.”
• Review Recent Hiring Data: Analyze your hiring outcomes over the past 12-24 months, looking for patterns across different demographic groups. While disparities don’t automatically indicate discrimination, they warrant closer examination.
• Evaluate Vendor Documentation: Gather information from your current vendors about their bias testing, transparency capabilities, and contractual protections.
• Assess Internal Capabilities: Honestly evaluate whether your organization has the resources and expertise to properly manage AI hiring tools in this evolving environment.

Building Awareness and Expertise

• Stay Informed: The legal and regulatory landscape around AI hiring is evolving rapidly. Regular monitoring of developments will be essential.
• Invest in Education: Ensure your HR team understands both the capabilities and limitations of your AI hiring tools.
• Develop Relationships: Establish connections with employment attorneys who understand AI and hiring technology issues.
• Consider Industry Resources: Professional HR organizations and industry groups are developing guidance and best practices for AI hiring tools.

When to Engage Legal Counsel

Given the complexity and evolving nature of AI hiring regulations, consider consulting with employment attorneys in several scenarios:

• Before implementing new AI hiring tools: Getting guidance upfront can help avoid problematic configurations
• When reviewing existing AI tool usage: An attorney can help assess your current risk exposure and suggest mitigation strategies
• If you discover concerning patterns in hiring data: Legal counsel can help you understand the implications and appropriate responses
• During vendor selection or contract negotiation: Attorneys can help ensure appropriate protections and clarifications of responsibilities
• When developing or updating hiring policies: Ensure your policies properly address AI tool usage and compliance requirements

The Broader Context

Regulatory Environment

The Workday lawsuit occurs against a backdrop of increasing regulatory attention to AI in employment. The EEOC and state agencies are developing guidance and enforcement priorities around automated hiring tools. This suggests the legal framework will continue evolving.

Industry Response

The case is likely to influence how AI hiring tool vendors approach bias testing, transparency, and client contracts. Businesses should expect changes in vendor offerings and potentially higher costs for compliant solutions.

Practical Realities

For many businesses, the efficiency gains from AI hiring tools are significant. The challenge is balancing these benefits against evolving legal and compliance requirements. This balance will likely require more active management and potentially higher investment in proper implementation and monitoring.

Moving Forward

The Workday lawsuit doesn’t mean businesses should automatically abandon AI hiring tools, but it does mean the era of casual implementation is ending. Success in this environment will require:

• Informed Decision-Making: Understanding both the benefits and risks of AI hiring tools
• Active Management: Treating AI hiring tools as systems requiring ongoing oversight and maintenance
• Professional Guidance: Engaging appropriate legal and technical expertise to navigate the evolving landscape
• Organizational Readiness: Ensuring you have the resources and capabilities to use these tools responsibly

The companies that thrive will be those that approach AI hiring tools with both ambition and appropriate caution, recognizing that these powerful technologies require sophisticated management to realize their benefits while managing their risks.

Final Thought

AI can dramatically streamline hiring—if implemented conscientiously. The Mobley lawsuit doesn’t demand halting AI use—but it does require that organizations treat these tools as critical systems that need governance, review, and human stewardship. Adopting AI with intentionality today means staying ahead of legal and ethical risks tomorrow.

Sources

This analysis is based on information from the following sources:

• Mobley v. Workday: Court Holds AI Service Providers Could Be Directly Liable for Employment Discrimination Under “Agent” Theory – Seyfarth Shaw LLP
• Discrimination Lawsuit Over Workday’s AI Hiring Tools Can Proceed as Class Action – Fisher Phillips
• Workday AI lawsuit receives the greenlight to proceed as a collective action – Norton Rose Fulbright
• Mobley v. Workday, Inc. Case Information – Civil Rights Litigation Clearinghouse
• AI Bias Lawsuit Against Workday Reaches Next Stage – Law and the Workplace
• Judge certifies Workday class action over alleged age-based job rejects – Top Class Actions
• Federal Court Allows Collective Action Lawsuit Over Alleged AI Hiring Bias – Holland & Knight
• Mobley v. Workday, Inc. – U.S. Equal Employment Opportunity Commission