AI Hiring Tools Are Employment Practices, Not Just Software, Legal Experts Warn

Companies integrating artificial intelligence into their recruitment processes are facing a critical legal wake-up call. A new legal perspective from Foley & Lardner LLP argues that AI in hiring must be treated as a regulated employment practice rather than a routine technology purchase to avoid severe legal pitfalls.

According to the firm's publication, titled "AI in Hiring: A Regulated Employment Practice, Not Just a Technology Purchase," employers are increasingly making the mistake of viewing AI tools through the lens of software procurement. The firm warns that this mindset leads companies to rely too heavily on vendor warranties or generic assurances of "ADA-compliance." However, Foley & Lardner emphasizes that such vendor promises do not relieve an employer of their independent legal obligations if a tool produces discriminatory outcomes.

The Compliance Gap

This shift in perspective comes as AI becomes ubiquitous in recruitment, handling everything from initial resume screening to complex candidate assessments. As these tools scale, they are being met with increased scrutiny from courts and regulatory bodies. The legal landscape is currently a patchwork of federal, state, and local requirements, meaning a tool that is compliant in one jurisdiction may expose a company to liability in another.

When AI is treated as a mere "tech purchase," the focus remains on the software's functionality and the vendor's contract. When treated as an "employment practice," the focus shifts to the actual impact of the tool on the workforce. This distinction is vital because employment law holds the employer responsible for the results of their hiring decisions, regardless of whether a human or an algorithm made the initial cut.

Industry Implications

For the broader industry, this means that the "set it and forget it" approach to AI procurement is no longer viable. Relying on a vendor's claim that their tool is unbiased is an insufficient legal defense. Companies must now implement rigorous internal audits to determine how these tools affect hiring equity and whether they inadvertently screen out protected groups.

Failure to do so leaves companies vulnerable to litigation and regulatory action. By shifting the internal framework to view AI as a regulated practice, firms can better align their technology use with existing labor laws and proactively mitigate the risk of algorithmic bias.

What to Watch

Moving forward, the industry should expect a rise in mandatory bias audits and more stringent reporting requirements for AI-driven hiring. Companies will need to develop a more sophisticated partnership with their tech vendors, moving beyond simple warranties toward transparent, verifiable data on how these tools operate in real-world employment scenarios.