Hunton Employment & Labor Perspectives

Ten U.S. senators are asking the U.S. Equal Employment Opportunity Commission to hone in on employers’ use of artificial intelligence (“AI”), machine-learning, and other hiring technologies that may result in discrimination.

The group of senators—Michael Bennet (D-CO), Cory Booker (D-NJ), Sherrod Brown (D-OH), Elizabeth Warren (D-MA), Catherine Cortez Masto (D-NV), Chris Coons (D-DE), Ron Wyden (D-OR), Tina Smith (D-MN), Chris Van Hollen (D-MD), and Jeff Merkley (D-OR)—jointly penned a December 8, 2020 letter to Chair Janet Dhillon. The letter urges that EEOC is responsible for combatting discrimination resulting from the use of hiring and other employment technologies. The senators voice concern about a number of hiring technologies, including:

• “[T]ools used in the employee selection process to manage and screen candidates after they apply for a job”;
• “[N]ew modes of assessment, such as gamified assessments or video interviews that use machine-learning models to evaluate candidates”;
• “[G]eneral intelligence or personality tests”; and
• “[M]odern applicant tracking systems.”

Imagine a future in which Artificial Intelligence (“AI”) does the recruiting and hiring at U.S. companies.  Every new hire will be the uniquely perfect candidate whose skills, personality, presence, temperament, and work habits are a flawless match for the job.  Performance management and poor performance become extinct, relics from an age in which humans brought primitive instincts, biases, and flawed intuition to hiring and employment decisions.  While there are risks and challenges to employers in introducing this technology, manufacturers of AI software say that some version of that future may not be too far off.  AI software such as Mya, HireVue, and Gecko are among the numerous platforms that employers are now leveraging to hone in on and hire the best candidates more quickly. Generally speaking, AI interviewing products combine mobile video interviews with game-based assessments. The AI platform then analyzes the candidate’s facial expressions, word choice, and gestures in conjunction with game assessment results to determine the candidate’s work style, cognitive ability, and interpersonal skills.

The United States District Court for the Western District of New York recently granted an early dismissal of a class action lawsuit prior to class certification.  Mandala v. NTT Data, Inc., 18-CV-6591 CJS, 2019 WL 3237361, at *1 (W.D.N.Y. July 18, 2019). The plaintiffs in Mandala were two African-American men who applied for and were offered jobs with the defendant employer.  After the employer conducted a criminal background check on the plaintiffs and found they each had a felony criminal conviction, the employer withdrew their job offers.  The plaintiffs filed a class action lawsuit against the employer alleging claims for disparate impact race discrimination under Title VII, and violations of New York state laws prohibiting criminal history discrimination and regulating the background check process.

A magistrate judge in the U.S. District Court for the District of Oregon recently made findings and recommendations to dismiss a purported class action against Kroger subsidiary Fred Meyer.  The suit alleges that the retailer’s background check process for prospective employees violates the Fair Credit Reporting Act by both failing to properly disclose that a report will be run, and failing to comply with the statute’s procedural requirements before taking adverse action against an applicant.

The Department of Justice’s top antitrust official announced that criminal charges against companies who agreed not to hire one another’s employees will be forthcoming, with announcements to be made in the coming months.

This past week the FTC and DOJ issued an 11-page guidance document aimed at protecting employees against anticompetitive conduct with respect to naked wage-fixing and agreements, in which companies agree on salary or other terms of compensation, and anti-poaching agreements. The guidance to human resource (“HR”) professionals and hiring managers relates to both hiring and compensation decisions.

The government’s guidance makes clear that naked wage-fixing agreements and anti-poaching agreements, in which companies agree not to recruit each other’s employees, are illegal under U.S. antitrust laws and, moving forward, DOJ will criminally investigate both individuals and companies suspected of their violation.  There is a carve-out for legitimate collaboration between employers.  The most common form of relevant, legitimate collaboration would be a joint venture between two companies, as these are not considered per se illegal under the antitrust laws.

The Fifth Circuit held recently that the State of Texas had standing to sue the Equal Employment Opportunity Commission (“EEOC”) over the Commission’s “Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII” (the “Guidance”) issued in April 2012, which warned employers that blanket policies against hiring felons could disproportionately exclude minorities and thus be deemed discriminatory. Texas originally sued the EEOC in late 2013 seeking an injunction against enforcement of the Guidance and a declaratory judgment that state agencies be allowed to maintain their policies, as instituted under state law, barring categories of convicted felons from state employment. In its complaint, the State also claimed that the EEOC’s Guidance improperly preempted state law. The lower court granted the EEOC’s motion to dismiss on grounds that Texas lacked standing to sue the EEOC because the Commission cannot bring an enforcement action against the state for failing to comply with the Guidance. The lower court also held that the EEOC Guidance did not constitute a “final agency action” under the Administrative Procedure Act (“APA”), and thus the Guidance was not subject to judicial review.

On March 1, 2016, the Securities and Exchange Commission (“SEC”) settled administrative charges against a popular telecommunications equipment supplier, Qualcomm Incorporated, under the Foreign Corrupt Practices Act (“FCPA”). According to the SEC, in addition to unlawfully providing meals, gifts and entertainment to foreign officials in an effort to win new business, Qualcomm also offered full-time employment and paid internships to family members and friends of foreign government officials in an effort to curry favor. In some cases, it appears these friends and family members would not have otherwise qualified for employment at Qualcomm and special accommodations were made to hire them. To settle the case, Qualcomm agreed to cease and desist from future violations, paid a $7.5 million civil monetary penalty and agreed to other heightened compliance measures.