--- title: Your ATS Might Be Breaking the Law and You Don't Even Know It description: Ensure your ATS is compliant with new laws and avoid legal issues. Discover how recent lawsuits impact hiring practices and what steps to take now. image: https://blog.hiringthing.com/hubfs/Embracing%20AI%20Will%20Ensure%20It%20Wont%20Take%20Your%20Jobs.jpg --- [![HiringThing-Teal-Green](https://blog.hiringthing.com/hs-fs/hubfs/Graphic%20Elements/Logos/HiringThing-Teal-Green.png?width=1686&height=270&name=HiringThing-Teal-Green.png "HiringThing-Teal-Green")](https://hiringthing.com) Open main menu Close main menu - [Blog](https://blog.hiringthing.com/) - Platform Open the submenu - Products Open the submenu - [Applicant Tracking](https://www.hiringthing.com/white-label/applicant-tracking-system/) - [Employee Onboarding](https://www.hiringthing.com/white-label/employee-onboarding/) - [Workflow Management](https://www.hiringthing.com/white-label/workflow-management/) - Overview Open the submenu - [White Label](https://www.hiringthing.com/white-label/) - [Partner Experience](https://www.hiringthing.com/partner-experience/) - [Developers](https://www.hiringthing.com/developers/) - [Integrations](https://www.hiringthing.com/integrations/) - [Security](https://www.hiringthing.com/security/) - Solutions Open the submenu - Industries Open the submenu - [HR Technology](https://www.hiringthing.com/white-label/hr-technology/) - [PEO & ASO](https://www.hiringthing.com/white-label/hr-organizations/) - [HR Consulting](https://www.hiringthing.com/white-label/hr-consulting/) - [Staffing](https://www.hiringthing.com/white-label/staffing/) - [Construction Software](https://www.hiringthing.com/white-label/construction/) - [Franchise](https://www.hiringthing.com/white-label/franchise/) - [Associations](https://www.hiringthing.com/white-label/associations/) - Company Open the submenu - [About Us](https://www.hiringthing.com/company/) - [Careers](https://careers.hiringthing.com/) - Compare HiringThing Open the submenu - [HiringThing vs. JazzHR](https://www.hiringthing.com/hiringthing-vs-jazzhr/) - [HiringThing vs. ICIMS](https://www.hiringthing.com/hiringthing-vs-icims/) - [HiringThing vs. GoHire](https://www.hiringthing.com/hiringthing-vs-gohire/) - [Press](https://www.hiringthing.com/company/press/) - [Contact Us](https://www.hiringthing.com/company/contact-us/) - Log In Open the submenu - [Applicant Tracking](https://login.hiringthing.com/users/login) - [Employee Onboarding](https://app.hiringthing-onboarding.com/signup) - [GET STARTED](https://www.hiringthing.com/private-label/discovery) [The State of HR Tech](https://blog.hiringthing.com/tag/the-state-of-hr-tech) # Your ATS Might Be Breaking the Law and You Don't Even Know It ![Sean Johnson](https://blog.hiringthing.com/hs-fs/hubfs/bafkreib4xdhcpsr72vc4itke23cntgiv4bw2lb3z5mgsk4m5wert6epzbi.jpg?width=45&name=bafkreib4xdhcpsr72vc4itke23cntgiv4bw2lb3z5mgsk4m5wert6epzbi.jpg) [Sean Johnson](https://blog.hiringthing.com/author/sean-johnson) [Share this blog post on Twitter](https://twitter.com/intent/tweet?text=I+found+this+interesting+blog+post&url=https://blog.hiringthing.com/your-ats-might-be-breaking-the-law-and-you-dont-even-know-it) [Share this blog post on Facebook](http://www.facebook.com/share.php?u=https://blog.hiringthing.com/your-ats-might-be-breaking-the-law-and-you-dont-even-know-it) [Share this blog post on LinkedIn](http://www.linkedin.com/shareArticle?mini=true&url=https://blog.hiringthing.com/your-ats-might-be-breaking-the-law-and-you-dont-even-know-it) ![Man at a laptop pondering his ATS](https://blog.hiringthing.com/hubfs/Embracing%20AI%20Will%20Ensure%20It%20Wont%20Take%20Your%20Jobs.jpg) The hiring technology you trusted to make recruiting easier might actually be putting your company in legal crosshairs. From class action lawsuits targeting major ATS vendors to new state laws rolling out with tight deadlines, 2026 is shaping up to be a reckoning for employers who assumed their software had compliance covered. **Here's what you need to know:** - Major ATS vendors like Workday and Eightfold AI are facing class action lawsuits alleging their algorithms discriminate against candidates based on age, race, and disability, and courts are increasingly willing to hold both the vendors and the employers who use them liable. - A January 2026 lawsuit against Eightfold AI alleges the company scraped data on over a billion workers and scored applicants without ever telling them, potentially violating the Fair Credit Reporting Act. - The Workday lawsuit has been expanded to a nationwide class action, with courts treating the ATS vendor as an "agent" of the employers it serves, meaning your company could be on the hook for what your software does. - New state laws, including the[Colorado AI Act](https://www.fisherphillips.com/en/news-insights/colorado-delays-ai-law-to-june-2026.html) taking effect June 30, 2026, are creating hard compliance deadlines that many employers have not prepared for. - [Choosing the right ATS](https://blog.hiringthing.com/choose-applicant-tracking-system) partner and auditing your current hiring tools is no longer optional. It is a legal and strategic necessity. ## The Lawsuits That Changed Everything If you are an HR professional or a hiring manager who relies on an ATS to sort through candidates, there is a good chance you have been sleeping pretty well at night. After all, the whole point of bringing in technology was to make hiring faster, more consistent, and less prone to the kind of human bias that gets companies into trouble. The problem is that the technology itself is now the thing getting companies into trouble, and in a big way. ### Mobley v. Workday Let's start with the case that has the entire HR tech world paying attention. The[Mobley v. Workday lawsuit](https://clearinghouse.net/case/44074/), formally filed in the U.S. District Court for the Northern District of California, centers on a plaintiff who applied to over 100 jobs through employers using Workday's AI screening tools over a period of seven years. He was rejected within minutes nearly every time. His claim is that Workday's algorithms systematically disadvantaged him based on his age, race, and disability status. What makes this case particularly significant is that the court did not just let the lawsuit proceed. In January 2026,[Judge Rita Lin expanded it into a nationwide class action](https://www.hrdive.com/news/workday-partial-loss-judge-refuses-claims-dismissal/814227/) covering applicants over 40, and the court ruled that Workday could be considered an "agent" performing hiring functions on behalf of employers. That distinction is enormous because it means the ATS vendor is not just a neutral tool sitting in the background. It is, in the eyes of the court,[actively participating in the decision-making process](https://www.seyfarth.com/news-insights/mobley-v-workday-court-holds-ai-service-providers-could-be-directly-liable-for-employment-discrimination-under-agent-theory.html) by recommending some candidates and rejecting others. [![DEMO OUR PLATFORM](https://no-cache.hubspot.com/cta/default/9445952/interactive-208996754497.png)](https://blog.hiringthing.com/hs/cta/wi/redirect?encryptedPayload=AVxigLK4fOQu%2FJywAKF5ivyCeedoofgArUtWYc9CnhCyGh3KOXCHdzxUYeM6LiNxHXAHa7rCC%2FH2WpOQr8Fy5j0skv036b32ywMaRvAzSuLkEiinsz2OCVIKWW%2BcBqZSf%2B%2Fb9p%2BUaulCc3D8Pgt37zqrCV%2FLQ%2Fcn7i9yyiNrkYXh5UDFYx03Hx3tI7dlbzwx4Q255f43WMMfMJ3Un4H%2Fi13CVdy9763Ss8s9kDQi1Wrrxpf%2B2nmtCQ%3D%3D&webInteractiveContentId=208996754497&portalId=9445952) ### Erin Kistler And Sruti Bhaumik v. Eightfold AI INC Then there is the Eightfold AI lawsuit, which takes a completely different angle but lands in the same uncomfortable place.[Filed in January 2026 by former EEOC chair Jenny R. Yang and the nonprofit Towards Justice](https://www.outtengolden.com/newsroom/landmark-class-action-accuses-eightfold-ai-of-illegally-producing-hidden-credit-reports-on-job-applicants), the class action alleges that Eightfold scraped personal data on over a billion workers, assigned each applicant a score on a zero to five scale, and filtered out low-scoring candidates before a human being ever looked at their application. The kicker is that the lawsuit does not even claim the algorithm was biased. It claims the algorithm existed in secret, without the disclosures required under the[Fair Credit Reporting Act](https://www.fisherphillips.com/en/news-insights/job-applicants-sue-ai-screening-company-for-fcra-violations.html). This reframes the entire conversation. You do not need to prove bias to bring a case against an ATS vendor anymore. You just need to show that the system was making consequential decisions about people without telling them. For companies that rely on[applicant tracking systems](https://hiringthing.com/) to manage their hiring pipeline, these cases should be a wake-up call. The legal theory that your ATS vendor is an "agent" acting on your behalf means that when the software discriminates or fails to disclose how it operates, your company shares the liability. That is not a hypothetical scenario. As[Jones Walker LLP detailed in their analysis](https://www.joneswalker.com/en/insights/blogs/ai-law-blog/ai-hiring-under-fire-what-the-eightfold-lawsuit-means-for-every-employer-using-a.html?id=102mkh2), when you read these two cases together, a coherent theory of AI vendor liability emerges that should concern every employer using algorithmic screening. ## The New Compliance Landscape Is Moving Fast It is not just the lawsuits that should have your attention. State and local governments are racing to regulate the use of [AI in hiring](https://blog.hiringthing.com/the-ai-recruiting-hiring-playbook-for-2026-and-beyond), and the compliance deadlines are coming in hot. New York City already has[Local Law 144](https://www.harrisbeachmurtha.com/insights/ai-assisted-hiring-in-2026-managing-discrimination-risk/) on the books, which requires employers using automated employment decision tools to conduct annual bias audits and notify candidates that AI is being used to evaluate them. The law includes specific requirements around how those audits are conducted, including calculations of selection rates and impact ratios across categories of sex, race, and ethnicity. But New York is just the beginning. The[Colorado AI Act takes effect on June 30, 2026](https://ogletree.com/insights-resources/blog-posts/colorados-artificial-intelligence-act-what-employers-need-to-know/), and it requires employers to exercise "reasonable care" to prevent algorithmic [discrimination](https://blog.hiringthing.com/effectively-preventing-discrimination-issues-in-hiring-practices) in their hiring processes. That phrase, "reasonable care," is doing a lot of heavy lifting because it essentially means that if your AI screening tool produces discriminatory outcomes and you cannot demonstrate that you took deliberate steps to prevent it, you are exposed. Violations can be treated as[deceptive trade practices carrying penalties of up to $20,000 per violation](https://www.rockymountainemployersblog.com/blog/2025/12/5/new-ai-compliance-requirements-prohibit-discrimination-for-colorado-employers). The Department of Justice has also started factoring AI risk management into how it evaluates corporate compliance programs, which means this is not just a state-level issue. It is working its way into the federal enforcement playbook too. What does all of this mean in practical terms? It means the days of purchasing an ATS, plugging it in, and assuming it handles compliance for you are over. Employers need to understand exactly how their hiring technology works, what data it uses, how candidates are scored and ranked, and whether the system provides the kind of transparency that these new laws demand. If you cannot answer those questions about your current ATS, you have a problem. This is exactly why partnering with a[transparent and compliance-focused ATS provider](https://hiringthing.com/) matters more than ever. Companies like[HiringThing](https://blog.hiringthing.com/considerations-searching-ats) have built their platforms around giving employers clear visibility into how candidates move through the hiring process, which is the kind of accountability that holds up under scrutiny. ### **The "Agent" Problem and Why It Matters to You** Let's come back to that "agent" concept for a moment because it is the legal theory that should keep every HR leader up at night. Traditionally, ATS vendors have operated under the assumption that they are simply providing a tool. The employer makes the hiring decisions, and the vendor just facilitates the process. That assumption is crumbling. When a court designates an ATS vendor as an "agent" of the employer, it means the vendor is not just handing you a hammer. It is swinging the hammer for you. And if that hammer hits the wrong nail, you both pay. The implications of this are far-reaching. If your ATS automatically filters out candidates before a human reviewer ever sees their application, the argument that a person made the final hiring decision gets much weaker. If the system relies on historical hiring data that reflects past biases, those biases get baked into every screening decision the algorithm makes going forward. And if the vendor cannot explain how its algorithm weighs different factors, or if you as the employer cannot explain it either, you are in a tough spot when a plaintiff or a regulator comes knocking. As[Fisher Phillips noted in their analysis of the Workday ruling](https://www.fisherphillips.com/en/insights/insights/discrimination-lawsuit-over-workdays-ai-hiring-tools-can-proceed-as-class-action-6-things), this case underscores the urgent need for AI compliance diligence across the board. This is not a niche legal issue affecting only the biggest companies with the most sophisticated AI tools. The reality is that[nearly 99% of Fortune 500 companies use ATS platforms](https://www.selectsoftwarereviews.com/blog/applicant-tracking-system-statistics), and adoption among smaller companies is growing rapidly. Research shows that 93% of recruiters now use an ATS of some kind. If you are using one, you need to know what it is doing under the hood. You need to know whether it is scoring candidates, how it is scoring them, and whether those scores have been audited for disparate impact. And you need that information documented in a way that you can produce if you are ever asked to. Taking a proactive approach to[preventing hiring bias through your ATS](https://blog.hiringthing.com/preventing-hiring-bias) is not just good ethics. It is a legal necessity. ## What Smart Companies Are Doing Right Now The good news is that there are concrete steps you can take to protect your organization without abandoning hiring technology altogether. Nobody is suggesting you go back to sifting through paper resumes. The point is to be intentional and informed about the technology you use, and to treat your ATS as a regulated selection system rather than a set-it-and-forget-it tool. Here are some things that you should consider. ### Audit Your Current Vendor Relationship Ask your ATS provider directly how their screening algorithms work, what data sources they use, and whether they conduct regular bias testing. If your vendor cannot answer those questions clearly, that tells you something important. Request documentation on their bias audit methodology and their approach to FCRA compliance. A quality ATS partner like[HiringThing](https://blog.hiringthing.com/where-most-white-label-ats-integrations-fail-how-make-yours-success) will not only be able to answer these questions but will welcome them, because transparency is a feature, not a liability. You can also use resources like the[EEOC's guidance on AI in hiring](https://www.eeoc.gov/litigation/briefs/mobley-v-workday-inc) to benchmark your own practices against what federal regulators are watching for. [![LET'S CHAT](https://no-cache.hubspot.com/cta/default/9445952/interactive-160708705085.png)](https://blog.hiringthing.com/hs/cta/wi/redirect?encryptedPayload=AVxigLLmplPHcylbN5P%2B7s0IMhsKNWONQcMW9PYPSwb2XCijWeD5sFWSCNdHK%2BBBm%2BggxPy2cCLH6T46CaHGdIW5n6X95SVm7Hbf7RgZ4r3O6kEw%2FYUY28spCgbfCqQ6EqSwThudHfAMjS1HA6yZi7aLK2Oe7tr%2FszXfPRPrwJtjptTrT7QJ4OKqADt1BcQv5mPT%2Fe5ONzLn9bA%3D&webInteractiveContentId=160708705085&portalId=9445952) ### Build Internal Governance Around Your Hiring Technology This means creating a clear record of how your hiring decisions are made, including the objective criteria your ATS uses, any adjustments made to AI-driven scores, and the role of human oversight at each stage of the process. The companies that will weather these legal challenges best are the ones that can demonstrate they had a deliberate, documented framework for managing algorithmic hiring risk. Think of it like an audit trail for your recruiting. If someone asks why a candidate was screened out, you should be able to trace that decision back to a specific, job-related criterion. As[K&L Gates advised employers](https://www.klgates.com/Navigating-the-AI-Employment-Landscape-in-2026-Considerations-and-Best-Practices-for-Employers-2-2-2026), developing a compliance roadmap now is essential to meeting obligations before deadlines arrive. ### Keep Human Beings In The Loop One of the most damaging allegations in these lawsuits is that candidates were rejected by an algorithm before any human ever reviewed their application. That is a terrible look in court, and it is also just bad hiring practice. Even if your ATS handles initial screening, make sure there is a meaningful human review step before any candidate is eliminated from consideration. ATS platforms like[HiringThing](https://blog.hiringthing.com/private-label-ats-enhances-hr-tech-companies) are designed to streamline and support your hiring process without removing the human element, and that balance is going to be critical going forward. ### Get Ahead Of The Compliance Calendar If you have employees or candidates in New York City, you should already be conducting annual bias audits. If you are hiring in Colorado, you need a plan in place before June 30, 2026. And keep your eye on[California's new FEHA regulations governing automated decision systems](https://www.seyfarth.com/news-insights/artificial-intelligence-legal-roundup-colorado-postpones-implementation-of-ai-law-as-california-finalizes-new-employment-discrimination-regulations-and-illinois-disclosure-law-set-to-take-effect.html), which took effect in late 2025 and create additional litigation risk for employers using AI in hiring. Do not wait for a regulator or a plaintiff's attorney to tell you that you are behind. Work with your legal counsel and your ATS provider to map out which laws apply to your operations and[build compliance into your process](https://blog.hiringthing.com/compliance-will-break-your-peo-unless-you-streamline-it) now, not after something goes wrong. ## The Bottom Line The hiring technology landscape has been shifting dramatically for years, and 2026 is proving to be the year when the legal system catches up to the pace of AI adoption in recruiting. Class action lawsuits against major vendors are testing new legal theories that expand liability to both the companies that build these tools and the employers who deploy them. New state laws are imposing hard requirements around bias audits, candidate disclosure, and algorithmic accountability. And the old assumption that buying a well-known ATS means compliance is handled is no longer a safe bet. None of this means you should fear technology. It means you should respect it enough to understand what it is doing on your behalf. The companies that invest in transparent, well-governed hiring processes will not only reduce their legal exposure but will build a better [candidate experience](https://blog.hiringthing.com/5-tips-for-improving-the-candidate-experience) in the process. Candidates are paying attention to how they are treated during the hiring process, and a fair, transparent approach is a competitive advantage in a tight talent market. Choosing an ATS partner that prioritizes[compliance, transparency, and human-centered hiring](https://hiringthing.com/) is not just risk management. It is smart business. Your ATS should be working for you, not setting traps you do not know about. Take the time to look under the hood, ask hard questions of your vendor, and build the kind of hiring process that you would be comfortable defending in front of a judge. Because in 2026, that is no longer a theoretical exercise. It is the reality of doing business. ## About HiringThing HiringThing is a modern recruiting and HR workflow platform as a service that creates seamless HR experiences. Our [white label solutions](https://www.hiringthing.com/private-label/) and [open API](https://www.hiringthing.com/developers/) enable technology and service providers to offer talent software to their clients. Approachable and adaptable, the HiringThing HR platform empowers anyone, anywhere to strengthen their team.   ![Sean Johnson](https://blog.hiringthing.com/hs-fs/hubfs/bafkreib4xdhcpsr72vc4itke23cntgiv4bw2lb3z5mgsk4m5wert6epzbi.jpg?width=150&name=bafkreib4xdhcpsr72vc4itke23cntgiv4bw2lb3z5mgsk4m5wert6epzbi.jpg) #### Sean Johnson Sean Johnson is a seasoned digital marketer with over two decades of experience helping brands grow through data-driven SEO, SEM, and content strategies. As the Digital Marketer at HiringThing, Sean applies his deep expertise in AI, analytics, paid search, and strategic planning to scale visibility and optimize conversion across channels. He was the founder of 7x Strategy, where he advised startups and created high-impact marketing frameworks for companies ranging from early-stage ventures to enterprise-level organizations. Sean is passionate about supporting entrepreneurial ecosystems and has served as a mentor at RAIN Eugene, as well as a pro tem instructor at the University of Oregon’s Lundquist College of Business, where he taught digital marketing for entrepreneurs. ## Related Articles [![](https://blog.hiringthing.com/hubfs/AdobeStock_492973654.jpg)](https://blog.hiringthing.com/enterprise-recruiting-software-trends-in-2026) [HiringThing News](https://blog.hiringthing.com/tag/hiringthing-news) [SaaS Insights](https://blog.hiringthing.com/tag/saas-insights) [HR Data & Analysis](https://blog.hiringthing.com/tag/hr-data-analysis) ### [Enterprise Recruiting Software Trends in 2026](https://blog.hiringthing.com/enterprise-recruiting-software-trends-in-2026) Enterprise recruiting software in 2026 is undergoing a fundamental transformation, driven by AI advancements, regulatory pressures, and shifting candidate expectations.... ![Sean Johnson](https://blog.hiringthing.com/hs-fs/hubfs/bafkreib4xdhcpsr72vc4itke23cntgiv4bw2lb3z5mgsk4m5wert6epzbi.jpg?width=45&name=bafkreib4xdhcpsr72vc4itke23cntgiv4bw2lb3z5mgsk4m5wert6epzbi.jpg) [Sean Johnson](https://blog.hiringthing.com/author/sean-johnson) [Read More](https://blog.hiringthing.com/enterprise-recruiting-software-trends-in-2026) [![](https://blog.hiringthing.com/hubfs/workflow-management-nurture-email-8.jpg)](https://blog.hiringthing.com/virginia-now-requires-a-pay-range-in-every-job-posting.-heres-what-that-signals-for-every-other-state) [The State of HR Tech](https://blog.hiringthing.com/tag/the-state-of-hr-tech) [Recruiting and Hiring News](https://blog.hiringthing.com/tag/recruiting-and-hiring-news) ### [Virginia Now Requires a Pay Range in Every Job Posting. Here's What That Signals for Every Other State.](https://blog.hiringthing.com/virginia-now-requires-a-pay-range-in-every-job-posting.-heres-what-that-signals-for-every-other-state) Virginia's pay transparency law took effect on July 1. Maine's followed on July 29. If you hire in either state, or recruit into them from an office somewhere else, the... ![Sean Johnson](https://blog.hiringthing.com/hs-fs/hubfs/bafkreib4xdhcpsr72vc4itke23cntgiv4bw2lb3z5mgsk4m5wert6epzbi.jpg?width=45&name=bafkreib4xdhcpsr72vc4itke23cntgiv4bw2lb3z5mgsk4m5wert6epzbi.jpg) [Sean Johnson](https://blog.hiringthing.com/author/sean-johnson) [Read More](https://blog.hiringthing.com/virginia-now-requires-a-pay-range-in-every-job-posting.-heres-what-that-signals-for-every-other-state) [![HiringThing\_Logo\_White\_no-space](https://blog.hiringthing.com/hs-fs/hubfs/HiringThing_Logo_White_no-space.png?width=275&name=HiringThing_Logo_White_no-space.png "HiringThing_Logo_White_no-space")](https://hiringthing.com) --- A modern recruiting platform as a service that creates seamless hiring experiences. Approachable and adaptable, the platform empowers anyone, anywhere to hire their dream team. [Follow us on LinkedIn](https://www.linkedin.com/company/hiringthing) [Follow us on Facebook](https://www.youtube.com/c/hiringthing) [Follow us on Twitter](https://www.twitter.com/hiringthing) [Follow us on Facebook](https://www.facebook.com/HiringThing/) - [Platform](https://www.hiringthing.com/private-label/) - [Developers](https://www.hiringthing.com/developers) - [Company](https://www.hiringthing.com/company) - [Blog](https://blog.hiringthing.com) - [Start Trial](https://register.hiringthing.com/register/start) - [Support](https://support.hiringthing.com/support/home) - [HiringThing Status](https://status.applicant-tracking.com/) - [Remote Work Hub](https://www.hiringthing.com/company/remote-work-hub/) ```json { "@context" : "https://schema.org", "@type" : "BlogPosting", "author" : { "@type" : "Person", "name" : "Sean Johnson", "url" : "https://blog.hiringthing.com/author/sean-johnson" }, "dateModified" : "2026-05-11T18:53:20.234Z", "datePublished" : "2026-03-30T23:39:53.000Z", 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"item" : "https://blog.hiringthing.com/tag/the-state-of-hr-tech", "name" : "The State of HR Tech", "position" : 2 }, { "@type" : "ListItem", "name" : "Your ATS Might Be Breaking the Law and You Don't Even Know It", "position" : 3 } ] } ``` ```json { "@context" : "https://schema.org", "@id" : "https://blog.hiringthing.com/your-ats-might-be-breaking-the-law-and-you-dont-even-know-it#article", "@type" : "BlogPosting", "about" : [ { "@id" : "https://blog.hiringthing.com/your-ats-might-be-breaking-the-law-and-you-dont-even-know-it#term-mobley-workday" }, { "@id" : "https://blog.hiringthing.com/your-ats-might-be-breaking-the-law-and-you-dont-even-know-it#term-eightfold-lawsuit" }, { "@id" : "https://blog.hiringthing.com/your-ats-might-be-breaking-the-law-and-you-dont-even-know-it#term-agent-theory" }, { "@id" : "https://blog.hiringthing.com/your-ats-might-be-breaking-the-law-and-you-dont-even-know-it#term-colorado-ai-act" }, { "@id" : "https://blog.hiringthing.com/your-ats-might-be-breaking-the-law-and-you-dont-even-know-it#term-local-law-144" }, { "@id" : "https://blog.hiringthing.com/your-ats-might-be-breaking-the-law-and-you-dont-even-know-it#term-fcra" } ], "alternativeHeadline" : "How ATS Lawsuits and New AI Hiring Laws Are Creating Legal Exposure for Employers in 2026", "articleSection" : [ "The State of HR Tech" ], "author" : { "@id" : "https://hiringthing.com/authors/sean-johnson#person" }, "dateModified" : "2026-03-30", "datePublished" : "2026-03-30", "description" : "Class action lawsuits against Workday and Eightfold AI, the Colorado AI Act, NYC Local Law 144, and the legal theory that ATS vendors act as employer 'agents' are reshaping compliance risk for any company using algorithmic hiring tools in 2026.", "headline" : "Your ATS Might Be Breaking the Law and You Don't Even Know It", "image" : { "@type" : "ImageObject", "height" : 630, "url" : "https://blog.hiringthing.com/hubfs/Embracing%20AI%20Will%20Ensure%20It%20Wont%20Take%20Your%20Jobs.jpg", "width" : 1200 }, "inLanguage" : "en-US", "isAccessibleForFree" : true, "keywords" : [ "ATS lawsuit", "Mobley v Workday", "Eightfold AI lawsuit", "Colorado AI Act", "NYC Local Law 144", "AI hiring compliance", "algorithmic discrimination", "ATS bias audit", "AI employment law 2026", "Fair Credit Reporting Act hiring" ], "mainEntityOfPage" : { "@id" : "https://blog.hiringthing.com/your-ats-might-be-breaking-the-law-and-you-dont-even-know-it#webpage" }, "publisher" : { "@id" : "https://hiringthing.com/#organization" }, "wordCount" : 1800 } ``` ```json { "@context" : "https://schema.org", "@id" : "https://blog.hiringthing.com/your-ats-might-be-breaking-the-law-and-you-dont-even-know-it#faq", "@type" : "FAQPage", "mainEntity" : [ { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "Mobley v. Workday is a class action filed in the U.S. District Court for the Northern District of California, in which the plaintiff applied to over 100 jobs through employers using Workday's AI screening tools across seven years and was rejected within minutes nearly every time. In January 2026, Judge Rita Lin expanded the case to a nationwide class action covering applicants over 40 and ruled that Workday could be considered an 'agent' performing hiring functions on behalf of employers." }, "name" : "What is the Mobley v. Workday lawsuit?" }, { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "The Eightfold AI class action, filed in January 2026 by former EEOC chair Jenny R. Yang and the nonprofit Towards Justice, alleges that Eightfold scraped personal data on over a billion workers, assigned each applicant a zero-to-five score, and filtered out low-scoring candidates before any human review. The lawsuit does not claim algorithmic bias. It claims the scoring system operated in secret without the disclosures required under the Fair Credit Reporting Act." }, "name" : "What is the Eightfold AI lawsuit about?" }, { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "Yes. Courts are increasingly treating ATS vendors as 'agents' performing hiring functions on behalf of employers, which means when the software discriminates or fails to disclose how it operates, the employer shares the liability. The Mobley v. Workday ruling explicitly embraced this agent theory, and a coherent theory of AI vendor liability is now visible across multiple cases." }, "name" : "Can my company be held liable for what our ATS does?" }, { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "The Colorado AI Act takes effect June 30, 2026, and requires employers to exercise 'reasonable care' to prevent algorithmic discrimination in hiring. If an AI screening tool produces discriminatory outcomes and the employer cannot demonstrate deliberate steps to prevent it, they are exposed. Violations can be treated as deceptive trade practices carrying penalties of up to $20,000 per violation." }, "name" : "What is the Colorado AI Act?" }, { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "NYC Local Law 144 requires employers using automated employment decision tools to conduct annual bias audits and notify candidates that AI is being used to evaluate them. The law includes specific requirements around how those audits are conducted, including calculations of selection rates and impact ratios across categories of sex, race, and ethnicity." }, "name" : "What does NYC Local Law 144 require?" }, { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "Ask your ATS provider directly how their screening algorithms work, what data sources they use, and whether they conduct regular bias testing. Request documentation of their bias audit methodology and FCRA compliance approach. A quality ATS partner will welcome those questions because transparency is a feature, not a liability. Use the EEOC's guidance on AI in hiring as a benchmark." }, "name" : "How can my company audit our ATS for compliance?" }, { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "In several jurisdictions, yes. NYC Local Law 144 requires candidate notification before AI is used in evaluation. The Fair Credit Reporting Act may require disclosure when consumer-style scoring is applied to applicants. The Colorado AI Act expands transparency obligations starting June 30, 2026, and California's FEHA regulations on automated decision systems took effect in late 2025." }, "name" : "Do candidates need to be told when AI screens their application?" }, { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "The agent theory holds that an ATS vendor is not merely a neutral tool but an active participant in hiring decisions when the software recommends, rejects, or filters candidates. When a court designates a vendor as an employer's agent, the vendor is treated as acting on the employer's behalf, and both parties can share liability for discriminatory or non-disclosed automated decisions." }, "name" : "What is the 'agent theory' in ATS lawsuits?" }, { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "No. The lawsuits are not arguments against hiring technology; they are arguments for using it intentionally. Smart companies are auditing their vendor relationships, building internal governance around algorithmic hiring decisions, keeping meaningful human review in the loop before any candidate is rejected, and staying ahead of compliance deadlines like the June 30, 2026 Colorado AI Act effective date." }, "name" : "Should we stop using AI in hiring because of these lawsuits?" }, { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "Nearly 99 percent of Fortune 500 companies use ATS platforms, and 93 percent of recruiters across all company sizes now use an ATS of some kind. Adoption among smaller companies is growing rapidly, which means the legal exposure described in these lawsuits is not a niche issue affecting only the largest employers." }, "name" : "What percentage of companies use an ATS?" } ] } ``` ```json { "@context" : "https://schema.org", "@id" : "https://blog.hiringthing.com/your-ats-might-be-breaking-the-law-and-you-dont-even-know-it#howto", "@type" : "HowTo", "description" : "A four-step framework for HR leaders to audit their applicant tracking system, build internal governance, and meet 2026 AI hiring compliance obligations.", "name" : "How to Protect Your Company from ATS Compliance Risk", "step" : [ { "@type" : "HowToStep", "name" : "Audit your current vendor relationship", "position" : 1, "text" : "Ask your ATS provider directly how their screening algorithms work, what data sources they use, and whether they conduct regular bias testing. Request documentation on their bias audit methodology and FCRA compliance. If your vendor cannot answer those questions clearly, that is itself a finding." }, { "@type" : "HowToStep", "name" : "Build internal governance around hiring technology", "position" : 2, "text" : "Create a clear record of how hiring decisions are made, including the objective criteria your ATS uses, any adjustments to AI-driven scores, and the role of human oversight at each stage. Think of it as an audit trail: if asked why a candidate was screened out, you should be able to trace the decision to a specific, job-related criterion." }, { "@type" : "HowToStep", "name" : "Keep human beings in the loop", "position" : 3, "text" : "Ensure a meaningful human review step before any candidate is eliminated from consideration, even when your ATS handles initial screening. One of the most damaging allegations in current lawsuits is that candidates were rejected by an algorithm before any human reviewed their application." }, { "@type" : "HowToStep", "name" : "Get ahead of the compliance calendar", "position" : 4, "text" : "Map jurisdictions: conduct annual bias audits if you hire in NYC under Local Law 144, build a plan for the Colorado AI Act before June 30, 2026, and watch California's FEHA regulations on automated decision systems. Work with legal counsel and your ATS provider to build compliance into your process before a regulator or plaintiff's attorney tells you that you are behind." } ], "totalTime" : "PT90M" } ``` ```json { "@context" : "https://schema.org", "@id" : "https://blog.hiringthing.com/your-ats-might-be-breaking-the-law-and-you-dont-even-know-it#glossary", "@type" : "DefinedTermSet", "hasDefinedTerm" : [ { "@id" : "https://blog.hiringthing.com/your-ats-might-be-breaking-the-law-and-you-dont-even-know-it#term-mobley-workday", "@type" : "DefinedTerm", "description" : "A class action filed in the U.S. District Court for the Northern District of California alleging Workday's AI screening tools systematically rejected an applicant over 100 times based on age, race, and disability. 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