EU Declares AI Used In Employment and Hiring a “High Risk” Category and Identifies Specific Regulatory Requirements
In March 2024, the EU passed the EU AI Act. It’s the first comprehensive AI regulation, and as the EU has done in the past with issues like data privacy, […]

In March 2024, the EU passed the EU AI Act. It’s the first comprehensive AI regulation, and as the EU has done in the past with issues like data privacy, it has again set the current high watermark for another technology-related regulation. The EU AI Act establishes a legal framework to ensure that AI systems are safe and transparent and respect fundamental rights.

It categorizes AI systems based on risk levels—prohibited, high-risk, and lower-risk—and sets out obligations for providers and users of these systems.

  • Prohibited AI Systems: Those posing unacceptable risks, such as social scoring by governments.
  • High-Risk AI Systems: Subject to strict requirements before market deployment.
  • Lower-Risk AI Systems: Require basic transparency obligations.

The EU has deemed AI systems used for recruiting, managing workers, and making self-employment decisions to be high-risk. These systems are subject to stringent requirements to ensure they don’t adversely affect job applicants or employees.

Some key requirements and points of guidance regarding algorithmic decision-making in employment stood out:

  • Transparency and Information Disclosure:
    • AI systems used in hiring and employment must be transparent about their nature and capabilities.
    • Candidates should be informed when AI is used in decision-making processes.
  • Non-Discrimination:
    • AI systems must avoid biases based on race, gender, ethnicity, and other protected characteristics.
    • Measures should be in place to ensure fairness and prevent discriminatory practices in recruitment and employment.
  • Accountability:
    • Employers must ensure that AI systems used in hiring decisions are accountable.
    • There should be clear processes to challenge and review AI-based decisions affecting employment.
  • Impact Assessments:
    • Providers must conduct impact assessments to identify and mitigate potential risks.
    • These assessments should focus on the fairness and transparency of the AI systems.
  • Documentation and Record-Keeping:
    • Detailed documentation must be maintained to demonstrate compliance with the Act.
    • Records should include data used, decisions made, and methodologies applied.
  • Monitoring and Audits:
    • Continuous monitoring and periodic audits are required to ensure ongoing compliance.
    • These processes help identify and correct biases or unfair practices that may arise.

The EU’s AI Act and the US OFCCP’s recent initial guidance on AI seem to attach tech providers to employers’ compliance requirements at a new level. This is seemingly based on the increasing dependency on predictive algorithms for selecting candidates and employees for roles based on a match identified by the system/algorithm. Previously, search criteria and the logic used to select employees or candidates for consideration have always been defined by HR system users. The systems in play were merely enabling those criteria. Many modern AI-driven systems now leverage machine learning and Large Language Models to establish similar criteria passively without any user prompt. However, under both the EU AI Act and the current US OFCCP guidance, the employer remains responsible for explaining and disclosing these criteria, which requires understanding the algorithm driving them. This goes far beyond system transaction logs and the saving and recalling of employee or candidate lists. Compliance shaped the foundations of early HR technology, and it seems it will be shaping the future AI-driven world of HR Tech.

There is an incredible opportunity for tech providers to establish a leadership position and differentiate while doing the right thing for employers, their employees, and their candidates. We’re leveraging our global WorkTech Advisory Network to help tech providers of all stages and in every HR and Work Tech category navigate these requirements and opportunities. Schedule a briefing to learn more.

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