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Artificial intelligence (AI) is rapidly becoming embedded in everyday employment decisions—from recruiting and hiring to performance management and discipline—and Illinois is poised to significantly expand employer obligations in this area. Effective Jan. 1, 2026, employers with one or more employees in Illinois (or which are hiring in Illinois) will be required to disclose any use of AI in employment-related decisions under newly enacted Illinois HB 3773. Failure to do so may yield a complaint under the Illinois Human Rights Act. Despite a recent executive order signed by President Trump impacting state AI laws, employers should plan for broad notice, compliance and nondiscrimination requirements to take effect in January.
Notice to Employees and Applicants of any Use of AI
Illinois HB 3773 requires employers to provide notice to employees and applicants whenever AI is used in making employment decisions. This notice obligation is broad and applies to any use of AI in connection with any of the following employment-related decisions:
- Recruitment
- Hiring
- Promotion
- Renewal of employment
- Selection for training or apprenticeship
- Discharge
- Discipline
- Tenure
- Terms, privileges, or conditions of employment
Unlike other state laws governing the use of AI for employment decisions, the new Illinois law contains no requirement that AI be a substantial factor or the sole basis for the decision. Thus, if AI plays any role in an employer's decision, notice is likely required. The failure to provide notice will constitute a civil rights violation under the Illinois Human Rights Act.
The Illinois Department of Human Rights is tasked with adopting rules to clarify the timing, means and circumstances for providing notice, with which we will provide an update to this alert in the future.
Scope of AI Covered
As with the scope of employment decisions covered, Illinois HB 3773 defines AI broadly as any machine-based system that infers from input how to generate outputs such as predictions, recommendations or decisions that can influence physical or virtual environments. Employers should carefully review the specifications and terms of use for software and services they utilize in employee relations. As AI becomes widely integrated into services utilized by businesses, such integrated AI could trigger notice obligations under the new Illinois law in the employment context.
Nondiscrimination and Zip Code Restrictions
In addition to the notice requirements, Illinois' Human Rights Act will now prohibit employers from using AI in a manner that discriminates against protected classes (race, color, religion, national origin, age, disability, etc.) and from using zip codes as a proxy for protected classes in employment decisions.
New Executive Order Raises Questions about the Future of State AI Laws
On December 11, 2025, President Trump signed an executive order directing the U.S. Department of Justice to challenge state laws that regulate AI, including those like Illinois HB 3773. The order asserts that AI regulation should be addressed at the federal level to ensure consistency and innovation and instructs federal agencies to review and potentially contest state-level AI requirements that may conflict with national policy.
However, the future of the executive order itself remains uncertain—typically an act of Congress is necessary to preempt state laws. Nonetheless, legal challenges to both the executive order and the new Illinois law may be coming soon.
Recommended Next Steps
Given the imminent effective date of the Illinois law, employers should prepare for enforcement by the state. We recommend:
- Auditing tools used in employment decisions for integrated AI;
- Preparing and implementing notice policies for applicants and employees;
- Reviewing and updating nondiscrimination policies, especially regarding zip code usage; and,
- Monitoring for further guidance from both state and federal authorities.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
