In a recent development in Mobley vs. Workday, Inc., the United States District Court for the Northern District of California denied in part Workday, Inc.’s (“Workday”) Motion to Dismiss,  allowing the Plaintiff to pursue novel claims that Workday – a third-party software vendor which provides artificial intelligence (“AI”)  driven employment screening tools to assist employers in selecting job applicants – may be liable for the discriminatory effects of those tools under federal anti-discrimination laws.

Background

Plaintiff Derek Mobley (“Mobley”) filed a putative class action lawsuit in February 2023, alleging that his applications for 80-100 jobs with employers who use Workday’s screening tools were rejected because the tools allegedly allow the employers to make discriminatory judgments when evaluating applicants, and allow for “preselection” of applicants not within certain protected categories.  For instance, Mobley alleged that he applied for a job he was already performing as a contractor, and was rejected without an interview.  Mobley further alleged that Workday’s administration and dissemination of the tools amounted to intentional and disparate impact discrimination in violation of Title VII of the Civil Rights Act (“Title VII”), the Age Discrimination in Employment Act (“ADEA”) and the Americans with Disabilities Act (“ADA”).

On January 19, 2024, the Court granted Workday’s Motion to Dismiss, with leave to amend. The Court held that Mobley had not sufficiently alleged facts demonstrating that Workday qualifies as an “employment agency” subject to liability under federal anti-discrimination laws.  Mobley filed his Amended Complaint in February 2024, and included two additional theories of liability – that Workday should be held liable as either an “indirect employer” or an employer’s “agent.”  

The Recent Decision

On July 12, 2024, the Court denied Workday’s Motion to Dismiss with respect to an agency theory of liability, holding that Mobley plausibly alleged that Workday’s employer-customers delegated to Workday and its AI screening tools their “traditional function of rejecting candidates or advancing them to the interview stage.”  The Court viewed this delegation of duties traditionally exercised by the employer as the type of conduct Congress intended to prohibit by including the term “agent” in the definition of “employer” under the relevant anti-discrimination statutes.  The Court held that Mobley plausibly alleged that Workday acts as an agent through his allegations that the company’s AI software automatically rejects or moves candidates forward in the hiring process, illustrated by Mobley allegedly receiving several rejection emails in the middle of the night.

The Court further stated that there is no meaningful distinction between “software decisionmakers” and “human decisionmakers” for purposes of determining coverage as an agent under the anti-discrimination laws, noting that to hold otherwise would lead to undesirable results (e.g., the Court opined that employers could delegate “discriminatory programs” to third-party software tools instead of humans, and the third parties who created the software could escape liability).  The Court reasoned, however, that many software vendors do not qualify as agents because employers have not delegated to them any traditional employer functions.  As an example, the Court explained that no agency theory of liability would exist for a software vendor that provides an employer with spreadsheet software, where the employer uses the spreadsheet software to sort and filter job applicants in a discriminatory manner, because the software is not participating in the determination of who should be hired.

The Court also denied Workday’s Motion to Dismiss Mobley’s discrimination claims pled on a disparate impact theory.  The Court reasoned that the “sheer number of rejections and the timing of those decisions, coupled with [Mobley’s] allegations that Workday’s AI systems rely on biased training data support a plausible inference that Workday’s screening algorithms were automatically rejecting Mobley’s applications based on a factor other than his qualifications, such as a protected trait.” 

Finally, the Court dismissed the claims that Workday engaged in intentional discrimination on the grounds that Mobley failed to plausibly allege that Workday intended that its screening tools discriminate against job applicants. 

Takeaways

The Court’s decision establishes that third-party vendors who furnish AI-screening tools to employers may be held liable as “agents” of those employers under Title VII, the ADA and ADEA.  In reaching this conclusion, the Court focused on allegations that employers delegated traditional job functions to the third-party vendor’s screening tools.  Employers should also be aware that the EEOC has released a technical assistance document on considerations for incorporating automated systems into employment decisions, as we reported here.  In relevant part, the EEOC takes the position that employers can be held liable under Title VII for selection procedures that use an algorithmic decision-making tool if the procedure discriminates on a basis prohibited by Title VII, even if the tool is designed or administered by another entity, such as a software vendor.  We will continue to monitor this case for further developments.

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Photo of Evandro Gigante Evandro Gigante

Evandro is the go-to employment litigator and counselor when clients face their most challenging, bet the reputation claims, or want to develop policies and practices that mitigate legal risk. As an award-winning partner in the Labor & Employment Law Department, member of the…

Evandro is the go-to employment litigator and counselor when clients face their most challenging, bet the reputation claims, or want to develop policies and practices that mitigate legal risk. As an award-winning partner in the Labor & Employment Law Department, member of the Employment Litigation group, and co-head of the Counseling, Training & Pay Equity group, he represents clients on a variety of labor and employment matters, including allegations of sexual harassment, race, gender, national origin, disability and religious discrimination. In addition, Evandro handles restrictive covenant matters, including non-compete, non-solicitation and trade secret disputes. Evandro also counsels employers through the most sensitive employment issues, including matters involving employer diversity, equity and inclusion initiatives.

With a focus on discrimination and harassment claims, Evandro has extensive experience defending clients before federal and state courts. He tries cases before juries and arbitrators and routinely represents clients before administrative agencies such as the Equal Employment Opportunity Commission, as well as state and local human rights commissions. Evandro often draws on his extensive litigation experience to help clients avoid the courtroom by effectuating positive change in the workplace through impactful anti-discrimination and harassment training, as well as robust employment policies.

Working in a wide range of industries, Evandro has experience representing clients in professional services, including law firms, financial services, including private equity and hedge funds, higher education, sports, media, retail, and others. Evandro also advises charter schools and other not-for-profit organizations on labor and employment matters on a pro bono basis.

Photo of Edward Young Edward Young

Edward “Eddie” C. Young is a senior counsel in the Labor & Employment Law Department and a member of the following Firm practice groups: Restrictive Covenants & Trade Secrets; Discrimination, Harassment & Title VII; and Whistleblowing & Retaliation.

Eddie represents employers in all…

Edward “Eddie” C. Young is a senior counsel in the Labor & Employment Law Department and a member of the following Firm practice groups: Restrictive Covenants & Trade Secrets; Discrimination, Harassment & Title VII; and Whistleblowing & Retaliation.

Eddie represents employers in all aspects of employment law, with a concentration on litigating complex employment disputes of all types before federal and state courts throughout the country, the U.S. Equal Employment Opportunity Commission, state and local human rights commissions and arbitral tribunals (e.g., FINRA and AAA).  In particular, Eddie has successfully litigated employment-related disputes alleging breach of non-compete agreements, theft of trade secrets, discrimination, sexual harassment, whistleblower retaliation, wage and hour violations, including employee misclassification claims, breach of contract, defamation, fraud and other business-related torts.  Eddie has obtained a world-wide injunction to enforce a client’s non-competition restriction on a former executive, successfully defended a client through summary judgment and appeal against retaliation claims brought by a former General Counsel, represented Fortune 500 companies in defense of high-profile harassment claims associated with the #metoo movement, and provided representation to several professional sports leagues.  He also has significant appellate experience, including successfully representing clients before the U.S. Circuit Court of Appeals for the First, Second and Seventh Circuits, as well as before the United States Supreme Court.  Eddie often draws on his litigation experience to help clients avoid the courtroom by effectuating positive change in the workplace through impactful training, counseling and developing robust employment policies.

Working in a wide range of industries, Eddie represented clients in food services, financial services, medical devices, telecommunications, higher education, sports, retail, real estate and others.

Eddie has been recognized as “One to Watch” by Best Lawyers in America since 2021 and as a “Rising Star” by Super Lawyers since 2017. He also regularly advises clients, writes and speaks on cutting-edge legal issues, including the use of Artificial Intelligence in the workplace, and legal issues arising from the collection and use of employee biometric information.

Eddie maintains an active pro bono practice, including on-going representation of a certified class of approximately 65,000 visually disabled Chicagoans in litigation challenging the City’s lack of accessible pedestrian crosswalks.  Eddie is also a member of the Firm’s Pro-Bono Committee and is a three-time recipient of the Firm’s “Golden Gavel” award for his significant pro bono contributions.

Prior to joining Proskauer, Eddie was a cum laude graduate from Loyola University Chicago School of Law. He also obtained a Master’s Degree in Human Resources and Industrial Relations from Loyola University Chicago Graduate School of Business. He began his practice at a national management-side employment law firm, and has also worked in the corporate human resources department of a national tax consulting firm and as a Fellow with the Illinois Human Rights Commission.