Employment: Employer Recruiting And Retention Under The Microscope

Most companies acknowledge that a robust pipeline of qualified, diverse talent is critical. Recent legal developments in the areas of diversity, equity, and inclusion (DEI) and artificial intelligence (AI) are creating potential new challenges for employers trying to maintain those pipelines. The result is likely to be an increase in employment lawsuits in 2024 and beyond.

In June 2023, the Supreme Court's landmark decision in Students for Fair Admissions Inc. v. President & Fellows of Harvard College effectively ended the practice of making college-admission decisions on the basis of race. "While the Harvard decision did not apply directly to employment decision-making, we have already seen, and expect to continue seeing, litigants argue for expansion of Harvard's holding and rationale to employment-related decisions," says Trina Fairley Barlow, a partner at Crowell & Moring and co-chair of the firm's Labor and Employment Group.

Indeed, after the Harvard decision, plaintiffs filed a number of lawsuits seeking to apply Harvard outside of the education context. For example, in August 2023, American Alliance for Equal Rights sued two private law firms, attacking their paid fellowship programs, which had been historically awarded to students from underrepresented minority groups. "These lawsuits sought to test the extent to which private employers can consider race when administering their DEI programs," says Barlow. Even before the decision, there had been an uptick in "reverse discrimination" lawsuits claiming that companies' DEI programs had resulted in discrimination against "non-diverse" employees. The decision has given such litigants another potential line of attack.

Meanwhile, lawsuits attacking companies' DEI programs will continue to be brought under Title VII of the Civil Rights Act and/or Section 1981 of the Civil Rights Act of 1866, which have historically been used to challenge race-based discrimination in employment. Under both statutes, plaintiffs must prove that they suffered an "adverse employment action" from a DEI program, but there is a split in the federal circuit courts over this issue. The majority view is that an adverse employment action must "materially" and "significantly" disadvantage an employee. However, the Fifth Circuit, DC Circuit, and Sixth Circuit have set lower bars for establishing an adverse employment action. Barlow notes that the Supreme Court's expected 2024 decision in Muldrow v. City of St. Louis may shed additional light on the question. If the Court interprets adverse employment action broadly to include lesser workplace harms and inconveniences, she believes it could open the door to new challenges to DEI programs.

The impact of AI

The use of AI and other technologies in employment decision-making is expanding rapidly. However, says Barlow, "in many ways, the technology is advancing faster than the laws, and that is creating enhanced employment-law risks for companies."

In 2021, the Equal Employment Opportunity Commission launched an Artificial Intelligence and Algorithmic Fairness Initiative, and it has since been "working hard to catch up with fast-moving technology," says Barlow. In 2022, the EEOC issued guidance saying that technology in the hiring process could result in discrimination under the Americans with Disabilities Act (ADA), and in 2023 it warned specifically that the use of AI in recruiting might result in disparate impact discrimination.

In September 2023, the EEOC reached a first-of-its-kind settlement with iTutorGroup after bringing a lawsuit alleging that the company's AI software rejected applicants on the basis of their age. In February 2023, a private plaintiff brought a class action lawsuit against the Workday software company alleging that its hiring tool included input from humans that reflected their unconscious bias, and thus discriminated on the basis of age.

These types of lawsuits are likely to be just the tip of the iceberg. The use of AI in the recruiting process is frequently centralized within companies and is often used company- or division-wide. This may make companies more vulnerable to pattern-or-practice discrimination lawsuits claiming that hiring practices discriminate against individuals on the basis of categories like age, race, and disability.

Overall, both Harvard and AI are making sound hiring practices something of a moving target—and corporations need to track and understand these unfolding litigation risks as they hire and retain talent.

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