Key AI Legal Issues in DEI and Employment Discrimination

February 01, 2025 (6 min read)

By: Emily Schifter, Troutman Pepper Locke

This article provides guidance and best practices for counseling employers on key employment discrimination and diversity, equity, and inclusion (DEI)-related legal issues associated with using artificial intelligence (AI) tools. The following is a summary of a more comprehensive practice note contained in Lexis Practical Guidance. It provides guidance and best practices for employers to navigate these issues, highlighting the potential benefits and risks associated with AI in employment decisions.

AI and Generative AI

AI is generally defined as technology that simulates human intelligence to perform tasks, with generative AI being a subset that can create novel content. Employers use AI tools for various functions, including recruiting, hiring, employee evaluation, and engagement. Generative AI, such as large language models, can generate human-like responses and content.

How Employers Are Using AI

Employers utilize AI in recruiting and hiring by screening resumes, optimizing job postings, and using video-interviewing software. AI is also used in employee evaluation through performance monitoring tools and market data analysis. AI is often used to gauge employee engagement. Specific examples include:

Workforce optimization tools
Worker management software
HR Chatbots
Drafting tools

Potential Anti-discrimination and DEI-Related Benefits to AI

AI can help achieve DEI goals by reducing bias, increasing efficiency, and supporting diverse employees. AI tools can process large data sets quickly, potentially identifying diverse candidates and uncovering inequities in salary or retention. In addition, employers can use AI tools to offer training, career path guides, or other employee-specific tools to help employees of all identities advance their careers, improve skills, or be matched with appropriate job opportunities.

Potential Discrimination and DEI-Related Risks to AI

AI poses risks of employment discrimination.

Many federal and state discrimination laws prohibit two types of discrimination:

Disparate treatment. Intentional discrimination against one individual because of their membership in a class protected by law.
Disparate impact. When a facially neutral policy or practice (including a selection procedure or test) unduly disadvantages individuals based on their membership in a protected class.

Though the use of AI could, in theory, implicate either type of discrimination, it is this second category that creates the biggest trap for the unwary employer.

Bias in data and programming, reliance on unlawful information, and revealing harmful trends are potential issues.

Employers must be cautious of the perception of bias and the risk of discrimination claims.

Compliance with Myriad Federal, State, and Local Laws and Guidance

Employers must comply with various laws and guidance, including federal anti-discrimination laws and specific state and local regulations. Executive agency guidance also provides frameworks for AI use in employment.

Ethical Considerations

Employers should consider ethical issues such as confidentiality, reliability of AI results, employee surveillance, and job displacement. AI tools should be used thoughtfully to avoid undermining DEI efforts and increasing income inequality.

Practical Ways to Mitigate Risk

Adopt AI Thoughtfully

Counsel employers to be deliberate and thoughtful in their adoption of AI-based tools. Advise employers to consider the following:

Comply with the law. Identify and understand applicable guidance and laws governing AI as a threshold matter, to ensure that adoption and use of a given tool will not itself create risk. Ensure AI tools are not asking for or collecting information prohibited by law.
Create a task force. Convene a task force to provide oversight on adoption and use of AI tools to ensure they are thoughtfully and consistently adopted, and make sure that the task force membership reflects diverse backgrounds, skillsets, and opinions.
Formalize a policy. Draft a policy governing use of AI, both by employees and by the company. Establish clear ethical guidelines and rules for AI implementation and use.
Investigate vendors. Ask vendors or partners offering or licensing AI tools about their testing efforts and how their algorithms are made and trained.
Consider contractual protection. If using a third-party tool, negotiate indemnification, warranty, and other risk-shifting language with vendors in the event of a claim raised in relation to a decision made by their technology.
Ensure diversity of teams and data. If creating or customizing an AI-based tool in-house, be sure to put together a diverse team to provide input on its design and implementation.
Test and verify. Engage in user testing of any AI tool to identify issues before formally implementing it more broadly.

Ongoing vigilance, human oversight, and training are essential to ensure AI tools do not harm DEI goals. Employers should provide notice of AI use and protect sensitive information.

The above information is a summary of a more comprehensive article included in Practical Guidance. Customers may view the complete article by following this link.

Not yet a practical guidance subscriber? Sign up for a free trial to view this complete article and other current AI coverage and guidance.

Emily Schifter is a partner at Troutman Pepper Locke. She handles a wide variety of labor and employment-related matters, including employment discrimination, leave, disability accommodation, and wage and hour litigation. Additionally, she counsels employers on many aspects of employment law and human resources issues.