Artificial Intelligence (AI) tools are being used by employers with more frequency to streamline processes and optimize employee performance. From resume screening to candidate matching, it’s clear AI isn’t going anywhere. However, the confusion surrounding AI’s use in various aspects of recruitment and hiring is increasing right along with it, leaving employers overwhelmed when considering their own hiring practices.
AI in Hiring: Efficiency vs. Risk
According to Ideal.com, 52% of talent acquisition leaders say that the most difficult part of recruitment is actually identifying the right candidates from such large applicant pools. As such, many of them view AI as the welcomed solution—a way to address and analyze large data sets quickly and efficiently, without having to review hundreds of resumes themselves, and move the hiring process along to get positions filled.
It may seem simple to some, but it is anything but. According to an “AI in Hiring and Work 2024 Survey” reported in Top AI in Hiring Statistics in 2024, while 44.2% of HR leaders reported significant acceleration in the hiring process due to AI, they also reported complicated challenges, including hiring bias (40%) and data privacy concerns (37.2%). As always, these types of challenges, including the increase in legal action in such a highly regulated industry, must be given due consideration. For employers then, it’s a delicate balancing act. The lure of automation and efficiency must be weighed against the inherent risks of potential bias, ethical considerations, and legal compliance.
With the stakes so high, and the drastic increase in federal, state, and local laws, regulations, and guidance that attempt to keep up with this ever-changing landscape, employers must use caution if they choose to use AI in their hiring processes. Throughout the country, employers are getting sued, and this will undoubtedly continue as more of them continue to be tempted by AI’s implicit promise of efficiency.
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Regulatory Oversight
Within the past couple of years, the use of AI in hiring faced increased scrutiny from U.S. government authorities. The Equal Employment Opportunity Commission (EEOC) held public hearings to examine the use of AI by employers in hiring decisions, as well as issued guidance regarding the use of software and other technologies in hiring and various employment decisions (“selection procedures”) and its compliance with federal civil rights laws and does not impede ADA requirements. The White House also released guidance in the Blueprint for an AI Bill of Rights regarding the use of AI in the hiring process and in other areas.
Last spring, a joint statement from federal agencies, including the EEOC, highlighted the enforcement of laws and regulations regarding AI’s impact on civil rights, fair competition, and consumer protection. And by the fall of last year, these statements and declarations transformed into action as the EEOC began enforcing their position more stringently. In a clear demonstration of their “pledge to vigorously use [their] collective authorities to protect individuals’ rights regardless of whether legal violations occur through traditional means or advanced technologies,” the EEOC entered a $365,000 Joint Settlement Agreement with a tutoring company based on claims that the company used hiring software that automatically rejected applicants based on their age.
AI oversight is not limited to the federal government, though. Illinois now requires employers that use AI-enabled analytics in interview videos to take certain steps to ensure transparency and unbiased decisions, while Maryland prohibits employers from using facial recognition software unless the applicant signs a waiver. Further, New York City recently passed the Automated Employment Decision Tools Law, requiring a “bias audit,” where employment decisions are to be screened and audited annually to ensure that the use of AI technology does not result in discrimination. Other states are currently considering similar legislation.
How Employers can Navigate AI in Hiring
As employers continue to engage in this balancing act, weighing the pros and cons of using AI in their hiring processes, all against the backdrop of increased scrutiny and regulation, they can take several measures to minimize their risks. This approach not only helps to enhance the efficiency and reliability of their screening processes but also fosters a fair and ethical hiring environment.
Here are five key strategies to minimize risk using AI in hiring.
1. Transparency
Employers should ensure transparency in any AI algorithms and processes used for recruiting and hiring by providing clear explanations to applicants about how AI is being utilized in decision-making. Other than this communication to the applicants, employers should also clearly update their policies and procedures to address the use of AI in their hiring practices.
2. Addressing Bias
Employers may want to regularly assess their AI models for potential bias. In this way, they can implement measures to mitigate bias in algorithms and help avoid discriminatory outcomes. This may involve using diverse and representative datasets during model training.
3. Compliance with Regulations
With the ever-changing regulatory landscape, employers must stay informed about relevant laws and regulations governing background screening and the use of AI in hiring. This includes compliance with data protection regulations, anti-discrimination laws, and other legal requirements at the federal, state, and local levels to avoid legal consequences. Employers should consult their legal counsel to confirm that their processes are in compliance with these laws, as well as the guidance from the EEOC, with the understanding that failure to do so could result in costly litigation.
4. Human Oversight and Decision-Making
Employers don’t want to lose the human touch in any respect, and this is no exception. They can do this by incorporating consistent human oversight in the recruiting and hiring process. While AI in hiring can automate certain tasks, human judgment is crucial for contextual understanding and making final decisions, particularly in processes that specifically deal with other individuals. This also helps to balance the limitations and potential biases of AI.
5. Regular Audits and Monitoring
Referencing the New York City law as a guide, regardless of where employers are located, may be a good option to consider. Conducting regular audits of AI systems used in the recruiting and hiring processes to identify and address potential issues will likely emerge as a best practice throughout the country. Employers can implement ongoing monitoring processes to ensure the continued effectiveness, fairness, and accuracy of AI models.
As background screening vendors, we neither use AI in our background screening processes nor recommend that employers do so. Working with Orange Tree, employers can rest assured knowing that they can lean on us as their partner in compliance and that their background checks will be conducted in the right way.
Why Orange Tree?
Orange Tree Employment Screening helps companies win their race to fill open positions by providing fast and easy background check and drug testing services. We are committed to helping our clients stay updated with compliance, such as mitigate risk and avoid legal exposure.
We forge long-term partnerships with our clients by offering a full range of technology-led screening solutions predicated on best practice and legally defensible screening programs. To get started with a background screening program tailored to your needs, you can schedule time to speak with our team.
This material is not legal advice and should not be construed as legal advice or a legal opinion on any specific facts or circumstances. The content is intended for general information purposes only, and you are urged to consult a lawyer concerning your own situation and any specific legal questions you may have.
