A federal judge has refused to dismiss landmark AI hiring discrimination claims against Workday, a warning HR leaders can't afford to ignore
A federal judge in San Francisco has ruled that Workday Inc. must face claims its artificial intelligence (AI)-powered screening tools discriminated against job applicants based on disability, race, age, and gender, advancing what is widely regarded as the most consequential AI hiring bias lawsuit in U.S. legal history. The decision on Monday by U.S. District Judge Rita Lin is a signal to every HR team using algorithmic screening software that legal exposure is no longer theoretical.
The proposed class action, Mobley v. Workday, was first filed in 2023 by Derek Mobley, a Black man over 40 with a disability, who alleged he was rejected from more than 100 positions at companies using Workday's platform, often within minutes of applying. It is the first lawsuit to broadly challenge the algorithmic decision-making underpinning the AI screening tools now used by most large U.S. employers.
What the judge ruled
Lin rejected Workday's argument that California's anti-discrimination laws do not apply when it screens applicants based outside the state who are applying for jobs elsewhere. Because Workday allegedly directed the conduct from its California headquarters, the judge said the company could face liability under state law.
The judge also declined to dismiss a claim that Workday's software flags job applicants using so-called proxy indicators of disability, including gaps in employment history, in violation of the federal Americans with Disabilities Act (ADA). She dismissed a separate claim related to discrimination against Asian American applicants on procedural grounds. Claims covering Black job seekers, women, and workers over 40 remain in play.
Workday denied wrongdoing. "Our technology looks only at job qualifications, not protected traits like race, age, or disability," the company said in a statement. "We rigorously test our products as part of our Responsible AI program to confirm our tools do not harm protected groups."
Why HR leaders should pay attention
The scale of this case is significant. Court filings show that approximately 1.1 billion applications were rejected using Workday's software tools during the relevant period, meaning the collective could encompass hundreds of millions of affected applicants, according to reporting by Law and the Workplace.
"The concern is that speed and efficiency are being prioritized over accuracy and fairness, and that can have real consequences for qualified candidates,” said Jasmine Escalera, career expert at MyPerfectResume. The comment reflects a tension HR leaders are already navigating. According to a MyPerfectResume report covered by HRD America, 73% of employers are now using AI in hiring decisions, with half saying their tools automatically reject up to 50% of applications before any human review. Meanwhile, the Reuters report on Monday's ruling noted that more than 80% of U.S. employers, and virtually all Fortune 500 companies, currently use some form of AI screening tool in their hiring process.
The legal risk does not sit with vendors alone. Employment lawyers and the Equal Employment Opportunity Commission (EEOC) have made clear that employers are responsible for vetting bias in AI tools used on their behalf, even when those tools are supplied by a third party. As one attorney told HRD America in an earlier report on AI hiring risks, "The EEOC has made very clear that the employer will be liable for mistakes made by third-party vendors. So it's really important for employers to screen vendors, even if they advertise that they're bias-free."
The audit problem
Even organizations that believe they've done their due diligence may be exposed. Research published by Stanford University and covered by HRD America found that an AI hiring tool can pass a bias audit at the aggregate level while still systematically screening out Black and Asian candidates for specific roles. The study followed 3.4 million people submitting 4 million job applications across 1,700 positions and found that applying the EEOC's standard threshold for adverse impact, 26% of Black applicants and 15% of Asian applicants were affected in ways that would not have been flagged by a standard audit.
The Mobley case could sharpen that scrutiny considerably. Legal analysts note that Lin's earlier decision to treat Workday as an employer under federal anti-discrimination law, because it performs screening functions its clients would otherwise carry out themselves, was itself a significant development. That does not shift liability away from the employer, but it does establish a new framework for vendor accountability.
What HR teams should do now
HR leaders using third-party AI screening tools should audit not just whether a tool has been tested for bias, but at what level of granularity that testing was conducted, and whether those findings map to how the tool is deployed across specific roles in their organization.
Legal experts have also recommended renegotiating vendor contracts to include audit rights, bias-testing documentation, and clearer indemnification language. Procurement and legal teams need to understand exactly what data the system uses to score and rank applicants before a discrimination claim arrives in discovery.
Colorado's AI law, which requires employers deploying high-risk AI systems to take reasonable care to protect consumers from discrimination, is set to take effect at the end of June 2026. Other states are watching. For HR teams still treating AI hiring bias as a vendor problem, the Workday ruling should settle the question.
