Utilizing Artificial Intelligence in Employment-Related Matters: Recent Developments and Best Practices

Recently, the intersection of artificial intelligence (AI) and employment law has become a focal point for legislators, regulators, and employers alike. As AI technologies continue to reshape hiring practices and workplace management, it is crucial for employers to stay informed about the latest legal developments and best practices. Recent developments in the evaluation of the role of AI in matters relating to workplace management highlight significant legal considerations, including the use of AI in employment decisions, joint employment scenarios, and the ethical implications of AI deployment.

Pros and Cons of AI in HR

While the use of AI offers significant benefits in screening applicants, boosting workplace retention, and reducing turnover, it also presents legal challenges that employers must carefully navigate.

Pros:

• Improved Efficiency and Speed: AI can streamline recruitment processes such as resume screening, candidate sourcing, and initial assessments, significantly reducing the time recruiters spend on these tasks. This allows HR professionals to focus on more strategic aspects of their roles.

• Enhanced Accuracy in Candidate Screening: Advanced AI algorithms can more effectively match job requirements with candidate qualifications, skills, and experiences, potentially leading to better candidate-job fit and increased likelihood of hiring suitable candidates.

• Potential Reduction in Bias: AI can help minimize unconscious and confirmation biases in hiring decisions by focusing on objective rather than subjective factors, potentially resulting in fairer and more inclusive recruitment practices.

• Cost Optimization: Generative AI can contribute to cost savings through automation of work activities, optimization of research and development processes, and improved customer service.

• Enhanced Candidate Experience: AI-driven tools like chatbots can offer immediate responses to candidate queries, providing a positive experience for candidates and engaging applicants throughout the recruitment process.

Cons:

• Privacy and Data Security Concerns: The handling of large volumes of candidate data by AI systems raises concerns about potential misuse or mishandling, which can have legal and ethical implications.

• Potential for Algorithmic Bias: AI systems can inherit biases present in historical data, leading to biased decision-making in candidate selection.

• Limitations in Assessing Human Attributes: AI may struggle to accurately evaluate candidates’ decision-making skills, cultural fit, and other interpersonal qualities that are crucial for workplace success.

• Difficulty in Differentiating Candidates: As generative AI makes it easier for applicants to create polished resumes and cover letters, recruiters may find it more challenging to discern between candidates’ qualifications based on these materials alone.

• Overreliance on AI: Employers risk becoming too dependent on AI systems for screening and filtering applicants without fully understanding the potential biases or limitations of these tools.

Department of Labor Takes the Lead

In recognition of the potential legal exposure inherent in the deployment of AI for employment-related matters, on April 24, 2024, the United States Department of Labor (DOL) issued comprehensive guidance on how to ensure AI compliance with the Fair Labor Standards Act (FLSA) and the Family and Medical Leave Act (FMLA). This guidance serves as a roadmap for employers utilizing AI in their employment practices, emphasizing that eliminating human judgment and discernment from these processes could result in violations of federal employment laws.

Key points from the DOL guidance include:

• Potential Compliance Risks: The DOL warns that removing human oversight from processes such as timekeeping, productivity monitoring, and wage calculation could lead to violations of federal employment laws.

• FAQs and Best Practices: The guidance provides detailed FAQs and “Promising Practices” to assist employers with the mitigation of risks associated with the use of AI use in the workplace.

• Emphasis on Human Supervision: The DOL stresses the importance of human oversight in AI-driven processes in order to ensure compliance with wage and leave laws.

State-Level Initiatives

As federal guidance evolves, individual states are also taking action. The International Association of Privacy Professionals [US State AI Governance Legislation Tracker (iapp.org) has introduced a new interactive tool that allows employers to monitor state-specific laws related to algorithmic bias, discrimination, and automated employment decision tools. This tool is particularly valuable for employers operating across multiple jurisdictions.

White House Weighs In

The federal government’s focus on AI includes the Executive branch. Executive Order 14110, issued on October 30, 2023, calls for a coordinated approach to the responsible development and use of AI. This order has been utilized in recent DOL guidance for federal contractors requiring nondiscrimination in AI-based hiring systems.

Best Practices for Employers

Although generative AI offers significant potential to transform and streamline HR processes, employers must carefully balance these benefits against legal and ethical considerations. In order to mitigate these risks and maximize the benefits of AI in recruitment and retention, it is recommended that employers:

• Provide advance notice to employees and applicants about the utilization of AI  in employment practices
• Ensure transparency in AI-driven processes
• Implement regular monitoring and testing of AI systems to verify compliance with legal requirements
• Conduct thorough due diligence when selecting AI vendors
• Maintain human oversight over all AI-assisted employment decisions

If you have questions about this topic or any other employment-related matter, please contact Connie Carrigan at (919) 250-2119 or email her at ccarrigan@smithdebnamlaw.com.

Co-written with Kaylyn Chatman – 2024 Smith Debnam Summer Associate

A 2024 Smith Debnam Summer Associate, Kaylyn Chatman comes to Smith Debnam after recently completing her second year of law school at North Carolina Central University. She earned a Bachelor of Arts in Criminal Justice from Livingstone College and a Master of Arts in Human Service Consulting from Liberty University. Before enrolling in law school, Kaylyn worked as a police officer for ten years.