Artificial intelligence has quickly become embedded across the HR technology landscape, from screening resumes and ranking candidates to recommending job matches, and identifying learning opportunities.
That growing influence is precisely why the Mobley v. Workday Inc., lawsuit has become one of the most closely watched legal cases in HR.
In the latest development, a federal judge on June 22 denied HR technology giant Workday’s motion to dismiss a proposed collective action lawsuit relating to California’s anti-discrimination law, the Fair Employment and Housing Act (FEHA).
Judge Rita F. Lin of the U.S. District Court for the Northern District of California first considered Workday’s assertion that the FEHA claims were not adequately pled. The claims alleged that the company’s AI-powered candidate screening features unlawfully filtered out applicants based on race, age, and disability.
Workday argued that FEHA should not apply because many of the class members are not California residents. Lin decided that FEHA can apply because there were “sufficient factual allegations in the complaint to show a nexus between California and the allegedly unlawful conduct,” due to Workday’s AI tools being “designed, developed, maintained, and controlled” from its California headquarters.
Lin also allowed a disability discrimination claim under the Americans with Disabilities Act (ADA) to proceed, but granted Workday’s motion to throw out a separate race-based disparate impact claim and a claim that Workday is liable as an employer because it uses the challenged procedures in its own hiring.
The case is the first of its kind to target the algorithmic decision-making behind AI recruiting software fast becoming commonplace among employers.
The case is now proceeding, with a ruling expected later this year.
Background
The proposed class action was originally filed in 2023 by Derek Mobley, who alleged that Workday’s applicant screening technology discriminated on the basis of age, race, and disability, violating the Age Discrimination in Employment Act (ADEA), Title VII of the Civil Rights Act, and the ADA.
Mobley said that since 2017, he’d been passed over for more than 100 jobs at companies that use Workday, and that because the rejections were often immediate or in the middle of the night, he believes they were automated.
The case has since expanded to include additional named plaintiffs and broader discrimination claims, including the alleged FEHA violations.
Lin ruled in 2024 that Workday could be considered an employer covered by federal laws banning workplace discrimination because it performs screening functions that its customers would normally carry out themselves. The nationwide collective action under the ADEA was approved in May 2025. The court reasoned that when a vendor’s AI tool performs a traditional hiring function such as screening, ranking, recommending, or rejecting applicants, the vendor is acting as the agent of its employer-customers, and federal anti-discrimination statutes apply.
Workday has repeatedly said that the claims in the suit are false, arguing that its AI screening tools do not make hiring decisions and that customers maintain full control of their hiring processes. “Our technology looks only at job qualifications, not protected traits like race, age, or disability,” a spokesperson said. “We rigorously test our products as part of our Responsible AI program to confirm our tools do not harm protected groups.”
The hotly anticipated landmark case will likely become a benchmark for how courts treat automated screening tools used across the employment lifecycle. It’s possible that HR technology vendors may be found to face direct liability for the outcomes their systems produce.
In a related case, a group of job applicants is suing well-known HR technology vendor Eightfold AI, with the claim that AI screening tools act as consumer reporting agencies subject to transparency mandates under the Fair Credit Reporting Act (FCRA).
A January 2026 class action alleges that Eightfold AI scraped the personal data of workers, scored job applicants, and discarded low-ranked candidates before a human being ever saw their applications. And the plaintiffs allege that all of this occurred without the disclosures required by the FCRA.
Eightfold denies the allegations, stating the platform “operates on data intentionally shared by candidates or provided by our customers.”
Growing Legal Risk
The Workday and Eightfold litigation is already sending a clear message: organizations can no longer treat AI as a black-box technology managed solely by vendors.
“AI in HR technology is already influencing decisions that directly impact who gets hired, promoted, or left behind,” said Sarah Smart, senior vice president, global talent acquisition and workforce strategy at Appian. “Regardless of the lawsuit’s outcome, this case serves as a call to action for HR leaders. HR executives must become proficient in AI’s applications, risks, and governance.”
Smart acknowledged AI’s tremendous value in talent acquisition, describing herself as an early adopter of the technology.
“I’ll admit that AI tools are incredibly compelling,” she said. “AI in TA is still revolutionary. When used responsibly, it can create greater efficiency in hiring, a better candidate experience, and more successful hiring decisions. However, the Mobley case highlights the risks.”
The lawsuit may involve Workday, but Smart emphasized that every employer should view it as an opportunity to examine its own technology ecosystem.
“The Mobley case underscores the importance of understanding where AI is in your existing HR tech stack and its potential risks,” she said.
That starts with basic governance questions. HR leaders should know exactly where AI exists within their recruiting and HR systems, what data those models were trained on, whether vendors conduct independent bias audits, what recruiting metrics algorithms are optimized to achieve, and what contingency plans exist if an AI system fails a bias assessment.
These questions are becoming increasingly urgent as litigation involving AI hiring tools continues to expand.
“The Workday case provides a warning about the risks involved in leveraging AI tools in recruitment and hiring tasks, but it is not the only example of such risk,” said Caroline Carrier, an attorney with Squire Patton Boggs in Columbus, Ohio. “Lawsuits alleging discrimination against AI tools and the employers using them have been on the rise since 2022, and show no signs of diminishing.”
Carrier noted that many employers mistakenly assume responsibility rests primarily with the software provider. Courts are increasingly signaling otherwise.
“One emerging certainty is that employers cannot hide behind the automated nature of their hiring tools at the risk of engaging in unlawful, yet unintended discrimination,” she said. Although the Workday lawsuit targets the technology provider itself, “other suits have implicated the employers involved as the responsible party for ultimately sanctioning and making hiring decisions based off of purportedly discriminatory AI tools.”
As a result, employers should carefully evaluate every AI-supported stage of the hiring process.
Perhaps most importantly, she cautioned against allowing AI to become the final decision-maker.
“All processes that are supported by AI should be just that — supported,” Carrier said. “AI should be used as a helper, not a source of authority. Final decision-making should always be left in the hands of the real people behind an employer’s hiring procedures.”
The growing complexity of AI governance is also reshaping the competencies required of senior HR teams.
According to Smart, traditional HR leadership functions must now be complemented by expertise in data analytics, HR technology strategy, and AI ethics.
The Legal Landscape Is Changing
Shelly Pagac, director and chair of the Employment and Labor Practice Group at Houston Harbaugh in Pittsburgh, believes the Mobley case could become a blueprint for future litigation, especially in the absence of federal or state legislation governing the use of AI in the hiring process.
One of the lawsuit’s most significant implications is the court’s willingness to view technology vendors as agents acting on behalf of employers, she said.
“If the vendor is your agent, the vendor’s flaws are your flaws,” Pagac explained. “The employer’s name is on the rejection notice, not the vendor.”
At the same time, states including California, Colorado, Illinois, and New York City have begun implementing their own AI governance requirements, creating an increasingly complex compliance environment.
To prepare, Pagac recommended four immediate steps:
- Inventory every AI tool involved in employment decisions.
- Demand vendor bias-audit documentation.
- Establish meaningful human-review checkpoints with override authority.
- Renegotiate vendor contracts to strengthen indemnification protections.
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