Labor & Employment Law Daily Wrap Up, EXPERT INSIGHTS—Regulating artificial intelligence in employment decision-making: What's on the horizon for 2025, (Jan 6, 2025)

Law Firms Mentioned:Foley & Lardner

Organizations Mentioned:Foley & Lardner, LLP

By Michael F. Ryan of Foley & Lardner

Employment law in 2024 could aptly be summarized as the "Year of Artificial Intelligence Legislation." Indeed, all but five states introduced new artificial intelligence (AI) legislation in 2024, with four of the five outliers simply not having 2024 legislative sessions. Texas was one such outlier state but is poised to join the majority when its legislature reconvenes in January 2025 and considers recently proposed legislation known as the Texas Responsible AI Governance Act (TRAIGA). As we transition into the new year, employers—particularly those operating in multiple states—need to be aware of current and proposed AI-related legislation in their jurisdictions to ensure they remain in compliance with the ever-evolving AI regulatory landscape.

AI regulation is a frequent topic of this blog because, even though there is no comprehensive federal legislation on the topic, the Equal Employment Opportunity Commission (EEOC) and the Department of Labor (DOL) have issued guidance documents and are strongly focused on ensuring human oversight of responsible AI utilization. Valid concerns abound, particularly in the use of AI tools for human resources decision-making, ranging from data privacy and algorithmic discrimination to job security and transparency.

A patchwork of state regulations of varying complexity have currently been implemented or are anticipated to come online soon. One of the most robust and talked about examples of AI regulation enacted in 2024 was the Colorado Artificial Intelligence Act (CAIA), heralded as among the first in the world to define and comprehensively regulate "high-risk artificial intelligence systems". Under the CAIA, employers deploying such AI tools must use "reasonable care" to protect employees from algorithmic discrimination, including a requirement to develop a risk management policy to mitigate potential bias as well as conduct annual impact assessments.

Moreover, the CAIA includes a requirement similar to that required by the federal Fair Credit Reporting Act (FCRA) in that employers must notify employees when a high-risk AI system is used to make decisions about them. While the CAIA does not come into effect until February 1, 2026, employers should be preparing now to meet its exacting standards.

The recently proposed TRAIGA similarly proposes to regulate developers and deployers of "high-risk AI systems." Specifically, deployers of high-risk AI systems would be required to conduct detailed impact assessments on no less than a semi-annual basis, including ongoing monitoring for actual or suspected algorithmic discrimination, cybersecurity safeguards, and transparency concerns. As proposed, the definition of "high-risk AI systems" would include any artificial intelligence tool that is a "contributing factor" to an employment decision or opportunity, meaning every Texas employer that utilizes AI in its HR decision-making would potentially fall under the TRAIGA's purview. The TRAIGA includes mechanisms for both governmental and private enforcement, making this one of the most critical AI legislations to follow as we head into 2025.

Employers should follow these best practices to respond to the explosion of AI legislation in 2024, including the CAIA, as well as anticipated legislation like the TRAIGA in the year to come:

Assess the regulatory landscape in the state(s) in which you operate to determine what compliance obligations apply to your organization.
Assess what artificial intelligence tools (e.g., resume screeners, applicant tracking systems, chatbots, etc.) your organization is utilizing.
Communicate with the developers of the AI tools your organization utilizes or intends to implement to develop a plan of action to comply with applicable regulations.
Develop an organizational policy on the use of AI in the workplace, establishing parameters for how such tools will be evaluated and approved to mitigate potential algorithmic bias and provide for transparency and data privacy.

To stay ahead of the curve in 2025, employers will need to act quickly and strategically, aligning their HR practices with the fast-evolving AI regulatory framework.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Michael F. Ryan

Foley & Lardner

321 North Clark Street, Suite 3000

Chicago

United States

Tel.: +1 312 832 4500

E-mail: info@foley.com

URL: www.foley.com/

Attorneys: (Foley & Lardner).

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