Algorithmic Hiring: The States' Deceptively Weak Legal Response by Dr. Timothy Smith

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Several states across the US have attempted to regulate AI-driven impacts on the employment application process. My last article, posted on Twenty-Two Twenty-eight, “Algorithmic Hiring Prejudice,” detailed a startling inequality in the use and regulation of Applicant Tracking Systems (ATS) used by employers across the US and the world. AI-powered ATSs process tens of millions of job applications every year and, in most cases, serve as the first filter for resumes and cover letters. ATSs such as Workforce and SuccessFactors will analyze resumes and cover letters, rank those with high potential, and discard low-quality ones using algorithms without a single person looking at them. Millions of job seekers do not know that a silent AI gatekeeper will make a swift, final decision about the success of their employment search without any human input, and that this decision can multiply across many unconnected companies through a common screening platform serving competing companies.

Several states have passed legislation to regulate ATSs in hiring, especially if they exhibit bias against age, race, or gender. However, the Federal Government does not currently provide clear rules regarding AI and hiring. In fact, only a small number of states have passed legislation to regulate AI-powered ATSs. The most stringent laws currently apply in New York City, not the whole state of New York. New York City “Local Law 144 of 2021 regarding automated employment decision tools (“AEDT”) prohibits employers and employment agencies from using an automated employment decision tool unless the tool has been subject to a bias audit within one year of the use of the tool, information about the bias audit is publicly available, and certain notices have been provided to employees or job candidates.” (nyc.gov) In other words, New York City requires all companies to test their hiring algorithms for bias at least once a year. Additionally, employers must inform candidates of the job qualifications targeted by the algorithm and offer alternative screening upon request. The law sounds comprehensive, but in practice, it places the onus on the applicant to challenge every individual infraction.

Since October, 2025, California has moved to regulate AI in Hiring under the Fair Employment and Housing Act by making it unlawful to use automated decision-making systems (ADS) discriminatorily. Additionally, employers need to allow applicants to opt out of automated hiring tools and specify that employers retain full liability for the use of ADS tools. Such a restriction prevents the employer from shirking responsibility for discrimination and placing it on the software provider. Again, the individual may not easily obtain compensation for discrimination, but the potential for a class action lawsuit should make employers more diligent.

In Colorado, earlier this year, a diminished law, SB 26-189, replaced the original 2024 AI law and will go into effect in 2027. The updated law specifies that an employer must provide, within 30 days, a plain-language explanation of a hiring decision and AI’s role in it if challenged. Additionally, individuals have the right to correct inaccurate data and request a “meaningful human review.” (littler.com) Interestingly, the only legal enforcement can happen through the Colorado Attorney General, not private action. The elimination of private action places the state between applicants and employers, but it does not specify how intensely the state should pursue employers regarding AI in hiring. Note, this new law applies to companies doing business in Colorado and to applicants living in Colorado.

Other states, such as Connecticut, Texas, and Maryland, have enacted related laws on AI and hiring, but the vast majority have not. Over forty states have AI in hiring bills under debate. However, most states presently allow algorithms used for hiring to operate without disclosure, testing, or a path to appeal bias or discrimination. Yes, anti-discrimination laws exist and do cover AI-powered systems, but individuals must seek remedies under broader laws to fight algorithmic discrimination. According to research by Jobscan, 97% of Fortune 500 companies use ATS systems. (jobscan), which reveals a deeper problem: a silent system quietly influencing a large share of who gets hired in America, with little recourse for the bulk of applicants.

Dr. Smith’s career in scientific and information research spans the areas of bioinformatics, artificial intelligence, toxicology, and chemistry. He has published a number of peer-reviewed scientific papers. He has worked over the past seventeen years developing advanced analytics, machine learning, and knowledge management tools to enable research and support high-level decision making. Tim completed his Ph.D. in Toxicology at Cornell University and a Bachelor of Science in chemistry from the University of Washington.

You can buy his book on Amazon in paperback and in kindle format here.