California Court Dismisses Artificial Intelligence Employment Discrimination Lawsuit

By Alex W. Karasik, Gerald L. Maatman, Jr. and George J. Schaller

Duane Morris Takeaways:  In Mobley v. Workday, Inc., Case No. 23-CV-770 (N.D. Cal. Jan 19, 2024) (ECF No. 45), Judge Rita F. Lin of the U.S. District Court for the Northern District of California dismissed a lawsuit against Workday involving allegations that algorithm-based applicant screening tools discriminated applicants on the basis of race, age, and disability. With businesses more frequently relying on artificial intelligence to perform recruiting and hiring functions, this ruling is helpful for companies facing algorithm-based discrimination lawsuits in terms of potential strategies to attack such claims at the pleading stage.

Case Background

Plaintiff, an African-American male over the age of forty with anxiety and depression, alleged that he applied to 80 to 100 jobs with companies that use Workday’s screening tools. Despite holding a bachelor’s degree in finance and an associate’s degree in network systems administration, Plaintiff claimed he did not receive not a single job offer. Id. at 1-2.

On July 19, 2021, Plaintiff filed an amended charge of discrimination with the Equal Employment Opportunity Commission (“EEOC”). On November 22, 2022, the EEOC issued a dismissal and notice of right to sue. On February 21, 2023, Plaintiff filed a lawsuit against Workday, alleging that Workday’s tools discriminated against job applicants who are African-American, over the age of 40, and/or disabled in violation of Title VII, the ADEA, and the ADA, respectively.

Workday moved to dismiss the complaint, arguing that Plaintiff failed to exhaust administrative remedies with the EEOC as to his intentional discrimination claims; and that Plaintiff did not allege facts to state a plausible claim that Workday was liable as an “employment agency” under the anti-discrimination statutes at issue.

The Court’s Decision

The Court granted Workday’s motion to dismiss. First, the Court noted the parties did not dispute that Plaintiff’s EEOC charge sufficiently exhausted the disparate impact claims. However, Workday moved to dismiss Plaintiff’s claims for intentional discrimination under Title VII and the ADEA on the basis of his failure to exhaust administrative remedies. Workday argued that the EEOC charge alleged only claims for disparate impact, not intentional discrimination.

Rejecting Workday’s argument, the Court held that it must construe the language of the EEOC charge with “utmost liberality since they are made by those unschooled in the technicalities of formal pleading.” Id. at 5 (internal quotation marks and citations omitted). The Court acknowledged that the thrust of Plaintiff’s factual allegations in the EEOC charge concerned how Workday’s screening tools discriminated against Plaintiff based on his race and age. However, the Court held that those claims were reasonably related to his intentional discrimination claims, and that the EEOC investigation into whether the tools had a disparate impact or were intentionally biased would be intertwined. Accordingly, the Court denied Workday’s motion to dismiss on the basis of failure to exhaust administrative remedies.

Next, the Court addressed Workday argument that Mobley did not allege facts to state a plausible claim that it was liable as an “employment agency” under the anti-discrimination statutes at issue. The Court opined that Plaintiff did not allege facts sufficient to state a claim that Workday was “procuring” employees for these companies, as required for Workday to qualify as an “employment agency.” Id. at 1. For example, Plaintiff did not allege details about his application process other than that he applied to jobs with companies using Workday, and did not land any job offers. The complaint also did not allege that Workday helped recruit and select applicants.

In an attempt to salvage these defects at the motion hearing and in his opposition brief, Plaintiff identified two other potential legal bases for Workday’s liability — as an “indirect employer” and as an “agent.” Id. To give Plaintiff an opportunity to attempt to correct these deficiencies, the Court granted Workday’s motion to dismiss on this basis, but with leave for Plaintiff to amend. Accordingly, the Court granted in part and denied in part Workday’s motion to dismiss.

Implications For Businesses

Artificial intelligence and algorithm-based applicant screening tools are game-changers for companies in terms of streamlining their recruiting and hiring processes. As this lawsuit highlights, these technologies also invite risk in the employment discrimination context.

For technology vendors, this ruling illustrates that novel arguments about the formation of the “employment” relationship could potentially be fruitful at the pleading stage. However, the Court’s decision to let Plaintiff amend the complaint and have one more bite at the apple means Workday is not off the hook just yet. Employers and vendors of recruiting software would be wise to pay attention to this case  –and the anticipated wave of employment discrimination lawsuits that are apt to be filed – as algorithm-based applicant screening tools become more commonplace.

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The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

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