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While artificial intelligence has been lauded the world over for its potentially transformative impact on, well, just about everything, state legislators across the country have been concerned about its potential for harm, especially in the workplace.
In May 2024, Colorado lawmakers approved SB 205, which proposed the nation’s first comprehensive law to broadly regulate AI and protect residents and employees from algorithmic discrimination.
The bill, which Colorado Gov. Jared Polis (D) signed the same month, allows the state’s attorney general to enforce penalties against developers or deployers of high-risk AI systems (including employers) who fail to meet statutory obligations to ward against their AI unlawfully treating anyone differently on the basis of their age, race or disability, among other protected characteristics.
In June 2024, the Illinois legislature approved HB 3773, which stipulated that employers in the Prairie State may not use AI that considers an applicant’s race or zip code to make hiring decisions.
Illinois Gov. J.B. Pritzker (D) signed that measure into law in August.
This past February, the Virginia legislature approved HB 2094, another comprehensive bill mandating how developers and deployers handle AI. However, on March 24, Virgina Gov. Glenn Youngkin (R) vetoed the measure.
Lawyer Elias Kahn, senior product manager for labor and employment, tax, federal government and employee benefits and executive compensation for the Practical Guidance team at LexisNexis®, said he suspects more states will pass legislation in 2025 to regulate AI discrimination in employment because “there is much potential for AI tools to discriminate against job applicants and employees.”
So far this year, lawmakers in at least 20 states have considered legislation that addresses artificial intelligence-related discrimination in the workplace, according to the LexisNexis® State Net® legislative tracking system.
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New York City became the first major jurisdiction to regulate AI discrimination in the workplace, with the passage of Local Law 144 in 2021. The law went into effect on July 5, 2023.
That particular law applies only to decisions regarding hiring and promotion, not to other employment-related decisions like compensation and termination. But Kahn said with more and more employers turning to AI technology, businesses should be cautious about the AI tools they use for any employment function.
“Employers are especially exposed to potential high liability when workplace AI tools discriminate against many job applicants or employees,” he said. “This may lead to costly class and/or collective action litigation.”
For example, in September 2023, three companies that provide English-language tutoring to Chinese students had to pay $365,000 to settle an employment discrimination lawsuit. According to the suit brought by the U.S. Equal Employment Opportunity Commission, the companies used software that automatically rejected job applicants based on their age, resulting in more than 200 rejections of qualified people in the United States.
In another example, the human resources technology company Workday is currently battling a potentially precedent-setting class-action lawsuit alleging that its applicant screening software discriminates based on race, age and disability.
In September 2024, the National Law Review wrote that the case “may serve as a wake-up for other AI ‘use cases’ beyond just HR,” with a federal court in California having held that an employer’s use of Workday’s software could create a direct liability to Workday, not just the employer.
The case, which is ongoing, “serves as a reminder that the legal landscape surrounding AI is evolving, and with it, the responsibilities of all parties involved,” the law journal wrote.
For more information on recent federal AI cases, including AI employment litigations, see the Practical Guidance Artificial Intelligence: Federal Litigation Tracker.
To avoid legal entanglements, Kahn recommends that businesses carefully review any AI tools they use for employment functions, potentially turning to both technical and employment law experts for independent audits to ensure they are not biased or otherwise potentially violating applicable employment laws.
In fact, he recommended that businesses do this even if their jurisdiction has no new AI-specific discrimination law because of the rapid adoption of AI workplace tools and the potential for liability under existing non-AI-specific employment laws.
“The damages can get very high in traditional discrimination and other employment law cases,” Kahn said.
Proposals to regulate AI discrimination failed in California, New York and at the federal level in 2024. But Kahn said businesses shouldn’t take that to mean legislative interest in AI workplace discrimination is waning.
Indeed, the law firm Fisher Phillips, which has been tracking AI discrimination legislation over multiple posts to its website, said in early 2025 that it expects “to see California and New York to be among the states on the forefront” of AI discrimination legislation this year.
“Over 30 states have formed AI committees or taskforces that have begun issuing reports and recommendations,” the firm wrote, “many of which will turn into proposed legislation.”
AI legislation is such a high priority for the Practical Guidance team at LexisNexis that it is tracking proposals at the federal and state levels in 2025 and has developed a survey on enacted state laws, including AI employment laws. Kahn suspects the team will have to frequently update these materials throughout 2025 as state legislators continue to dig into the issue.
“I don’t have a crystal ball, but there’s a strong probability we’ll see more of these state AI workplace discrimination laws pass in 2025,” he said.
—By SNCJ Correspondent BRIAN JOSEPH
Visit our webpage to connect with a LexisNexis® State Net® representative and learn how the State Net legislative and regulatory tracking service can help you identify, track, analyze and report on relevant legislative and regulatory developments.