The U.S. Consumer Financial Protection Bureau (CFPB) cautioned employers in new guidance issued Oct. 24 about the use of artificial intelligence and algorithmic scoring to monitor and evaluate workers.
The agency warned that companies using third-party “digital tracking and opaque decision-making systems,” such as “black box” AI tools, must follow Fair Credit Reporting Act (FCRA) rules.
The FCRA, enacted in 1970, protects consumers from unfair credit reporting and is the fundamental law regulating employment screening, such as traditional background checks. The CFPB said it wishes to make clear that the FCRA’s protections apply to newer AI-based evaluation technologies, as well.
“Workers shouldn’t be subject to unchecked surveillance or have their careers determined by opaque third-party reports without basic protections,” said CFPB Director Rohit Chopra. “The kind of scoring and profiling we’ve long seen in credit markets is now creeping into employment and other aspects of our lives. Our action makes clear that long-standing consumer protections apply to these new domains just as they do to traditional credit reports.”
The tools in question include those that purport to assess and evaluate candidates and employees; monitor productivity; and predict employee behavior, including assessing the likelihood of workers engaging in union organizing or estimating the probability that a worker will quit.
These new technologies often contain sensitive information unknown to workers, the CFPB said, and can significantly impact hiring decisions, job assignments, and career advancement. Inaccurate reports may cause workers to lose job opportunities, face unfair treatment, or suffer career setbacks due to information they did not have a chance to dispute nor even know existed, the agency said.
Before using these tools, the FCRA mandates that employers first obtain employee consent, provide transparency about the data used in adverse decisions, and allow workers to dispute inaccurate information.
“These protections are essential in an era where worker data is increasingly commodified and used to make critical employment decisions,” the CFPB said. The agency urged businesses to review their current practices to ensure compliance with the law.
At a recent hearing on the subject, Acting Secretary of Labor Julie Su said that data collection by employers has become a heightened risk amid the rise of AI. “I believe there is a way to embrace innovation, but not sacrifice worker well-being,” Su said.
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