Can an employer be sued for disparate impact in hiring?

Yes - your company can be sued for disparate impact.

Disparate impact occurs when a neutral employment practice (e.g., an AI hiring tool, assessment test, or job requirement) disproportionately excludes members of a protected group (such as based on race, sex, age, or disability), even if there is no intent to discriminate.

Legal Basis for Disparate Impact Claims:

Employers may be held liable under:

• Title VII of the Civil Rights Act of 1964 – covers race, color, religion, sex, and national origin.

• Age Discrimination in Employment Act (ADEA) – protects individuals age 40 and over.

• Americans with Disabilities Act (ADA) – covers discrimination against disabled individuals.

Real-World Example:

• In Mobley v. Workday (2024–2025), a class-action lawsuit alleges that Workday’s AI hiring tools disproportionately rejected older, Black, and disabled applicants. The court allowed it to proceed as a collective action, signaling that employers using such tools may be liable if the tools cause discriminatory outcomes.

Real-World Example:

• In Mobley v. Workday (2024–2025), a class-action lawsuit alleges that Workday’s AI hiring tools disproportionately rejected older, Black, and disabled applicants. The court allowed it to proceed as a collective action, signaling that employers using such tools may be liable if the tools cause discriminatory outcomes.

How to Mitigate the Risk:

• Conduct regular bias audits of hiring tools

• Monitor for adverse impact ratios

• Offer reasonable accommodations for assessments

• Ensure transparency and documentation

Failing to address disparate impact can lead to lawsuits, regulatory penalties, and reputational harm. Proactive auditing and inclusive design are your best defenses.