Employers now have many AI tools available to assist them in making employment decisions, including recruitment, hiring, retention, promotion, transfer, performance monitoring, demotion, dismissal, and referral.

It has become ingrained in our reality, so much so, that the EEOC has recently updated guidance explaining the application of Title VII of the Civil Rights Act of 1964 to automated systems that incorporate artificial intelligence in a range of HR-related uses.

So, how does this impact your business?

If the tool results in an adverse discriminatory impact, employers may be held liable, the U.S. Equal Employment Opportunity Commission (EEOC) clarified in new technical assistance on May 18.

Things to Watch Out For:

• AI vendors may not disclose their testing methods, and may have companies bear all risk for alleged adverse impact of the tools.
• Front line HR mangers who source AI vendors may not be aware of all of the risks of using these tools.

Use of The Four-Fifths Rule

The four-fifths rule, which applies for HR AI tools also, is a general rule of thumb for determining whether the selection rate for one group is “substantially” different than the selection rate of another group.

The rule states that one rate is substantially different than another if their ratio is less than four-fifths (or 80%).

For example:

“the selection rate for Black applicants was 30% and the selection rate for White applicants was 60%. The ratio of the two rates is thus 30/60 (or 50%). Because 30/60 (or 50%) is lower than 4/5 (or 80%), the four-fifths rule says that the selection rate for Black applicants is substantially different than the selection rate for White applicants in this example, which could be evidence of discrimination against Black applicants.”

In Conclusion

The EEOC puts the burden of compliance squarely on employers. “[I]f an employer administers a selection procedure, it may be responsible under Title VII if the procedure discriminates on a basis prohibited by Title VII, even if the test was developed by an outside vendor,” the agency states in its technical assistance guidance.

Employers that choose to use AI HR tools should have effective AI oversight, and routinely test for potentially adverse impacts.