Navigating AI Discrimination: A Closer Look at the EEOC's Landmark Settlement

Breaking down the Facts

The Equal Employment Opportunity Commission (EEOC) entered into a settlement agreement in its first lawsuit, alleging discrimination based on artificial intelligence (AI). In the lawsuit, the EEOC alleged that iTutorGroup, an online English-language tutoring company, and its affiliated companies, violated the Age Discrimination in Employment Act (ADEA). These allegations stemmed from claims that their application software was designed to systematically reject female applicants aged 55 or above and male applicants aged 60 or above. Between late March and early April 2020, the EEOC contended that the defendants neglected to hire the charging party and over 200 qualified tutor applicants aged 55 and older from the United States, allegedly due to their age.

As per the EEOC’s claims, the charging party applied to the defendant using her true birthdate and faced an instant rejection. The very next day, when the charging party reapplied with a more recent birthdate, while keeping the rest of the application identical, she received an interview offer.

The defendants refuted all claims made in the Amended Complaint and asserted that their tutors were independent contractors rather than employees.

Key Terms of the Settlement

On August 9, 2023, the EEOC filed a Joint Notice of Settlement and Request for Approval and Execution of Consent Decree, setting forth the terms of the settlement agreement with the defendants. The presiding judge must approve the Decree before it becomes effective.

The Future of AI in the Workplace

iTutorGroup’s settlement with the EEOC emphasizes that employers must ensure their use of AI in the workplace adheres to federal antidiscrimination laws. In January, the EEOC issued its draft enforcement plan for 2023 through 2027 (the SEP), which confirmed the agency will focus on the use of AI throughout the span of an employee’s employment – from recruitment to application to performance management.

In May, the EEOC issued guidance on AI and discrimination (“Assessing Adverse Impact in AI Employment Selection Under Title VII”), addressing potential disparities in job applicant and employee treatment due to AI. The EEOC’s guidance makes it clear that employers bear the burden of compliance with AI employment tools. Importantly, the guidance states that an employer may be held liable for the actions of agents, including software vendors.

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