Without transparency and stronger safeguards, AI-driven recruitment could spark a new wave of legal disputes
Australian employers are increasingly turning to artificial intelligence to screen job applicants – but there is still no legal requirement to tell candidates when algorithms, not humans, are making key decisions about their careers.
That gap is “strange” and increasingly unsustainable given the rapid uptake of AI in recruitment, said Melini Pillay, principal at McCabes, in conversation with HRD.
Research from the University of Melbourne and the Responsible AI Index shows around 62% of Australian organisations already use AI in recruitment processes, with even higher adoption among global businesses. Yet there is no explicit law requiring private-sector employers to disclose AI use in job ads or hiring.
“It certainly feels necessary that some regulation be introduced or parameter requirements on disclosure be made,” Pillay said, pointing to the “significance of recruitment processes” and people’s basic right to earn a living.
“At the very least, you would like to know how employers using AI to screen applicants account for any bias in the algorithm.”
Patchwork rules and public‑sector carve-out
While there is no dedicated AI disclosure regime for private employers, Pillay noted some existing frameworks already brush up against AI in recruitment.
Privacy reforms under consideration are likely to intersect with hiring practices, particularly around how personal information is collected, processed and disclosed. However, Pillay doubts these will fully address “the actual negative impact relying solely on AI can have”.
Government agencies are further along. They must issue transparency statements when they use high-risk automated systems, including automated hiring tools. Those statements require disclosure of “the effects to people, risks it poses and safeguards” – but those obligations have not been extended to the private sector.
Work health and safety laws also provide an indirect hook: even though they do not mention AI explicitly, employers must manage AI in the workplace as they would any other hazard that could affect workers’ health or wellbeing.
In theory, that could capture harmful or biased AI practices, though Pillay said it has not yet been seriously tested in this context.
Pillay added: “I don’t believe there are any laws in Australia that currently address AI in recruitment” outside the limited government transparency requirements.
Rising disputes on the horizon
Pillay expects the current legal vacuum to be short-lived.
“There are some discussions on the need for laws, particularly given the concern that an algorithm can of itself create a bias,” she said. “But in my research they appear quite limited.”
The University of Melbourne, for instance, has warned that AI could worsen discrimination in hiring. Pillay said that warning sits uneasily alongside Australia’s “significant reliance” on such tools.
She anticipates these tensions will surface as more legal disputes.
Applicants already have avenues to challenge unfair treatment. Under the Fair Work Act, candidates can bring general protections claims if they believe they were discriminated against in the recruitment process, and Pillay notef there have been “some cases regarding this in the US” involving algorithmic decision-making.
As AI becomes more deeply embedded in hiring, she expects Australia will move towards “some defined processes this year”, potentially mirroring government transparency requirements or emerging through further amendments to the Privacy Act.
AI Act or targeted reforms?
Whether AI in recruitment will ultimately sit under a broad, EU-style “AI Act” or be captured through existing laws remains unclear.
Pillay is cautious about calling for a sweeping new statute.
“I’m certainly not one to advocate for the introduction of new legislation that our HR people will need to get across, particularly in light of all the recent legislative change and the natural fatigue and challenge these roles are facing,” she said.
Instead, she sees more incremental options: AI in hiring could be tackled as a component of the Privacy Act or via an addendum to the Fair Work Act aimed at the use of AI in hiring and employment.
Valuable – but risky for vulnerable groups
Despite the risks, Pillay emphasised that AI in recruitment is “significantly valuable” when used well. It can help employers process large volumes of applications quickly, identify baseline qualifications and streamline early screening.
But she warned that the very features that make AI powerful can also deepen inequities if left unchecked.
AI tools can disadvantage groups such as women, people whose first language is not English, younger and older workers, and people with disabilities, she says – especially “dependent on what we feed the algorithm”, including historical data that may reflect past bias.
The technology may also “be looking for perfection”, systematically filtering out candidates whose CVs, language style or career paths do not match a narrow, idealised profile.
Another emerging concern is that AI may favour applicants who themselves use AI tools to refine their CVs and cover letters, which “may or may not be a true representation of the individual”.
Given what’s at stake for people’s ability to earn a living, it’s not enough to just assume the algorithm is neutral.
Why human judgment still matters
For all the promise of automation, Pillay is adamant that AI must not replace human judgment at critical stages of hiring.
“For me, AI cannot eliminate what comes from an interview process, the gut instinct, the energy and cultural fit for a workplace. In the end we're still talking about people and sometimes those perfect on paper candidates are all wrong for the organisation or team,” Pillay said.
As employers ramp up their use of AI in job ads and screening, Pillay’s message is twofold: embrace the efficiency and insights AI can bring, but be transparent about its use, actively manage bias and keep humans firmly in the loop.
Without that, Australia risks allowing silent algorithms to shape careers and livelihoods in a legal grey zone – with sharper regulation and litigation only a matter of time.
