Duane Morris Takeaway: This week’s episode features Duane Morris partner Jerry Maatman, special counsel Adam Brown, and associate Elizabeth Underwood with their discussion of key ruling issued in the ongoing Mobley v. Workday litigation challenging the use of AI tools in employment practices.
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Episode Transcript
Jerry Maatman: Hello, everyone, and thank you for being here again on the next episode of the Class Action Weekly Wire. I’m Jerry Maatman, a partner at Duane Morris, and joining me today are my colleagues, Adam Brown and Elizabeth Underwood. Thanks so much for being on the podcast today.
Elizabeth Underwood: Glad to be here, Jerry.
Adam Brown: Thanks for having me, Jerry.
Jerry: Today, we’re discussing a significant decision in a rapidly evolving area of artificial intelligence and employment law. The case is Mobley v. Workday, and it involves a June 2026 decision from the Northern District of California. The plaintiffs in this lawsuit allege that Workday’s AI-driven applicant screening tools disproportionately screen out applicants based on race, age, disability, and other protected categories. While this isn’t a final ruling on the merits, the court’s decision on Workday’s motion to dismiss contains several important takeaways for employers, especially those using artificial intelligence in recruiting and hiring. With that background, Adam, can you start by giving our listeners a quick overview of the case?
Adam: Absolutely, Jerry. The plaintiffs in this case are a group of job applicants who allege that they applied for positions through employers. They used Workday’s applicant screening platform. According to the complaint, Workday’s AI and machine learning tools evaluated, ranked, and in some cases automatically rejected applicants. The plaintiffs claimed those tools had a disparate impact on protected groups, including older workers, individuals with disabilities, and certain racial groups. This latest ruling focused primarily on procedural issues. Workday asked the court to dismiss portions of the third amended complaint, arguing that the plaintiff still hadn’t adequately connected their claims to California, and that several new allegations exceeded the scope of what the Court previously allowed them to amend. The court granted some portions of Workday’s motion but denied most of it.
Jerry: Well, there are rulings, there are cases, and then there are cases, and I would say this is one of the most closely watched employment discrimination class action cases in the United States. Elizabeth, what do you see as the important takeaways from the ruling?
Elizabeth: The biggest takeaway is that the court allowed the plaintiffs’ California Fair Employment and Housing Act, or FEHA, claims to proceed. That’s significant because many of the plaintiffs are not California residents and applied for jobs located outside California. Workday argued that California employment law shouldn’t apply to those circumstances. The company essentially said there wasn’t a sufficient nexus between the alleged discrimination and California. The court disagreed.
Jerry: Adam, why would the court disagree with respect to that, what many would call an extraterritorial, type of argument?
Adam: Well, the plaintiffs had revised their complaint to allege that Workday’s AI screening systems were designed, developed, maintained, trained, and operated from Workday’s California headquarters. The court stated that the plaintiffs weren’t simply alleging that Workday happened to be headquartered in California. Instead, they alleged that the actual screening, scoring, and rejection decisions generated by the AI tools originated from California-based operations. At the pleading stage, the court found those allegations sufficient. What’s particularly notable is that the court viewed Workday as potentially being directly responsible for discriminatory conduct, rather than merely acting as a passive software vendor.
Jerry: That seems like a very major point of the decision. What did the court say about Workday’s role here?
Elizabeth: So, Workday argued that if an employer customer wouldn’t be liable under FEHA, then Workday shouldn’t be liable either. The court rejected that argument and explained that under California law, an entity acting as an employer’s agent can be directly liable for its own discriminatory conduct when performing employment-related functions on behalf of employers. In other words, the court treated Workday not merely as a software provider, but as a company that allegedly participated in employment decision-making through its screening technology. That distinction could have implications well beyond this case.
Jerry: Let’s talk about the practical implications of a ruling like that. What are the takeaways that employers should note from this ruling?
Adam: There are a couple of important takeaways from this. First, employers should recognize that courts are increasingly willing to scrutinize AI tools used in hiring. Historically, employers might have viewed applicant screening software as a neutral technology solution, but courts are now looking much more closely at whether those systems could create disparate impact on protected groups. Second, employers cannot assume that liability concerns end with the vendor. Even though Workday is the defendant here, the allegations highlight the risks associated with relying on automated screening tools without understanding how they function or whether they create adverse impacts.
Jerry: Elizabeth, to me, another important and interesting aspect of the decision involved its discussion of disability discrimination. Could you give our listeners some insights on that?
Elizabeth: Sure, so one plaintiff alleged discrimination based on physical disabilities, specifically asthma and cancer survivorship. The complaint alleged that AI hiring tools may identify proxy indicators associated with health conditions, things like employment gaps, medical leave history, or patterns that suggest treatment and recovery. The plaintiffs contended that the algorithm can infer disability-related characteristics from those proxies, even when disability information isn’t directly provided. Importantly, Workday did not challenge the sufficiency of those allegations in this motion. Instead, it argued that the plaintiff wasn’t permitted to add those theories. The court rejected that procedural argument and allowed the disability claim to proceed. For employers, that’s another reminder that AI systems can potentially create risk, even when they don’t explicitly ask about protected characteristics.
Jerry: Well, bottom line is, the court didn’t deny the motion in its entirety. What claims, indeed, were thrown out?
Adam: Yeah, that’s correct. One of the plaintiffs attempted to add a new race-based disparate impact claim that was focused on alleged discrimination against Asian American applicants, but the court found that theory had not been properly asserted in earlier versions of the complaint, and so it exceeded the scope of the amendment the Court had authorized, and as a result, that claim was dismissed.
Adam: The court also just struck allegations suggesting that Workday should be liable as an employer based on its own hiring practices. Concluding that that theory had not previously been pleaded and wasn’t authorized by the amendment order. So, while the plaintiffs won most of the major issues, Workday did succeed in narrowing the case in several respects.
Jerry: Well, as we wrap up this episode of the Class Action Weekly Wire, what are some of the broader lessons you think employers should take, both from this case and from this ruling?
Adam: I see at least three major lessons. First, AI governance is becoming a core employment law issue. Second, employers need visibility into how automated screening systems operate. Including what data they use, how candidates are ranked, and whether outcomes are regularly audited for disparate impact. Third, contractual protections with vendors are becoming increasingly important. Employers should review representations, warranties, indemnification provisions, audit rights, and compliance obligations relating to AI-enabled employment tools.
Elizabeth: I would add one more point. This decision reflects a growing judicial willingness to treat AI-driven employment decisions as employment practices subject to traditional discrimination laws. The technology may be new, but courts are applying familiar legal principles, including disparate impact, agency liability, and anti-discrimination statutes to evaluate these systems. Employers should expect continued scrutiny from courts, regulators, and plaintiffs’ attorneys in this area.
Jerry: Well, great insights from both of you, Elizabeth and Adam. The Mobley vs. Workday case is certainly another reminder that while artificial intelligence may streamline recruiting and employment-related decisions. It certainly doesn’t eliminate legal risk. In some respects, it may create new legal risks that employers need to manage and mitigate. So, we’ll continue monitoring developments in this case and the broader landscape of AI-related employment litigation in the class action space. Well, thanks so much for being with me today, Adam and Elizabeth, and thanks to our listeners for tuning in.
Adam: Thank you, Jerry, for having me.
Elizabeth: Thanks, everyone, have a great week.