Workday AI Hiring Lawsuit Could Reshape Employer Liability

A federal court has ruled that discrimination claims against Workday's AI hiring tools can proceed — not just against the employers who used them, but against Workday itself. The case is Mobley v. Workday, Inc., and it names every employer using an AI screening tool as a potential defendant in the same type of claim. If the court's theory holds, your vendor contract does not protect you.

Here's what you need to understand about this case before your next hiring cycle.

Case Overview

Derek Mobley filed a class action complaint on February 21, 2023, in the U.S. District Court for the Northern District of California against Workday, Inc. — Case No. 3:23-cv-00770-RFL, assigned to Judge Rita F. Lin.

Mobley alleges that Workday's AI-powered applicant recommendation system — used by employers to score, sort, rank, and screen job applicants — unlawfully discriminates on the basis of race (African American), age (over 40), and disability. The claims arise under Title VII of the Civil Rights Act, the Age Discrimination in Employment Act (ADEA), the Americans with Disabilities Act (ADA), and California's anti-discrimination laws. Mobley applied to over 100 positions through employers using Workday's platform and was rejected without interviews each time. He alleges the AI tool's design reflected employer biases and relied on biased training data that produced systemic exclusions across protected categories.

What makes this case unusual is that Workday was not Mobley's employer or prospective employer. Workday is a third-party HR technology vendor whose software is used by thousands of other companies to make hiring decisions. The case puts the vendor — not just the employers — in the defendant seat.

Key Rulings

The case has cleared two significant procedural hurdles.

On July 12, 2024, the court denied Workday's second motion to dismiss. The court rejected the argument that Workday qualifies as an "employment agency" under federal law — but it allowed Mobley's disparate impact discrimination claims to proceed on an "agent" theory of liability. Under this theory, Workday may be held directly liable as an agent of the employers who use its software to make hiring decisions. The court dismissed Mobley's intentional discrimination and aiding-and-abetting claims under California law but preserved the core federal disparate impact claims (GovInfo court filing, May 16, 2025 order referencing prior rulings).

On May 16, 2025, the court granted conditional certification of the ADEA collective action claims. The court found that Mobley sufficiently alleged a unified policy — Workday's AI applicant screening system — affecting all putative class members. Workday argued that different employer-clients' varied use of the tools and differing applicant qualifications made collective treatment inappropriate, but the court ruled those differences were immaterial for certification purposes (GovInfo court order).

An October 2, 2025, order directed the parties to prepare a dissemination plan for notifying potential opt-in plaintiffs. As of March 2026, the case remains active, with discovery ongoing and the last known filing dated March 27, 2026.

The 1.1 Billion Applications Figure

During the conditional certification proceedings, Workday disclosed in court filings that approximately 1.1 billion applications were rejected using its software tools during the relevant time period (from September 24, 2020, to the present). This means the potential ADEA collective could number in the "hundreds of millions" of job seekers — making it potentially one of the largest collectives ever conditionally certified in an employment discrimination case (GovInfo court order, May 16, 2025).

The Agent Liability Theory

The central legal innovation of this case is the "agent" theory of liability. Under Title VII, the ADEA, and the ADA, the definition of "employer" includes "any agent" of the employer. Mobley argues that when employers delegate hiring decisions to Workday's AI screening system, Workday acts as an agent of those employers and can therefore be held directly liable for discriminatory outcomes.

The court agreed this theory was at least plausible enough to survive dismissal. This matters because, until this ruling, it was generally assumed that AI vendors occupied a legal gray zone — they might bear contractual responsibility to their clients, but direct liability to the job applicants screened by their tools was an open question. If this theory is ultimately upheld, it would establish that AI vendors who design and operate screening tools used in hiring decisions can be sued directly by affected applicants under federal anti-discrimination law.

The EEOC's Involvement

The U.S. Equal Employment Opportunity Commission (EEOC) filed a 21-page amicus curiae brief on April 9, 2024, in support of plaintiff Mobley (full brief PDF). The brief, signed by EEOC General Counsel Karla Gilbride, advanced three distinct theories of liability:

Employment agency theory: The EEOC argued that Workday plausibly operates as an "employment agency" because it engages to a significant degree in screening and referral activities traditionally associated with employment agencies (Brief at pp. 4–10).

Indirect employer theory: The EEOC argued Workday is an "indirect employer" because it exercises significant control over applicants' access to employment opportunities. The relevant inquiry, per the EEOC, is not whether Workday controls employers' day-to-day operations but whether it can control or interfere with applicants' access to those employers (Brief at pp. 10–12).

Agent theory: The EEOC argued Workday is an "agent" of employers because employers have delegated hiring decision authority to Workday's system. The brief cited case law establishing that where an employer delegates "functions traditionally exercised by an employer" to a third party, that third party can be found to be an employer by virtue of the agency relationship. The EEOC cited its own prior guidance stating that employer's agents "may include entities such as software vendors, if the employer has given them authority to act on the employer's behalf" (Brief at pp. 12–14).

The court ultimately allowed the agent theory to proceed while dismissing the employment agency theory. But the EEOC's endorsement of all three theories signals that the federal enforcement agency views AI vendor accountability as squarely within the reach of existing civil rights law.

What This Means for Employers Using AI Hiring Tools

If you use any AI screening tool — not just Workday's — this case affects you. The agent liability theory does not stop at Workday. It applies to any vendor whose system performs a hiring function on your behalf. If that system produces discriminatory outcomes, you may face claims as the principal, and your vendor may face them too. The ADEA conditional certification here means the plaintiff class can number in the hundreds of millions. That is not a small-claims problem.

AI adoption in HR tasks climbed to 43% in 2025, up from 26% in 2024 — the pool of employers potentially facing this exposure is growing rapidly. Workday alone reports more than 10,000 customers worldwide. The companies using AI in hiring decisions are no longer edge cases; they are the majority.

Practically, employers should be conducting or requiring bias audits of their AI hiring tools, documenting their selection and monitoring processes, and reviewing vendor contracts to understand who bears responsibility for discriminatory outcomes. Our AI Bias Audit Report Template provides the framework for conducting these audits. The EEOC AI Hiring Compliance Kit covers the full Title VII and UGESP documentation requirements. And the Vendor AI Due Diligence Kit gives you the questionnaire and contract addendum templates to hold vendors accountable.

What This Means for AI Vendors

For AI vendors in the HR technology space, this case represents a fundamental shift in potential liability. If upheld, the agent theory means that vendors who build, operate, or maintain AI hiring tools can face direct lawsuits from the applicants those tools screen — even though the vendor has no direct employment relationship with those applicants.

This changes the vendor relationship in several ways. Vendors can no longer assume that contractual indemnification clauses with employer-clients fully insulate them from liability. They may need to proactively conduct and publish disparate impact analyses. They face pressure to provide audit trails and explainability for algorithmic decisions. And they may need to redesign their business models to account for the possibility that they are, legally speaking, agents of every employer that uses their platform.

Other Active AI Employment Discrimination Cases

Mobley is not the only case in this space. The EEOC's settlement with iTutorGroup in September 2023 was the first federal AI hiring discrimination case to reach resolution. In EEOC v. iTutorGroup, Inc., Civil Action No. 1:22-cv-02565 (E.D.N.Y.), the EEOC alleged that iTutorGroup programmed its tutor application software to automatically reject female applicants aged 55 or older and male applicants aged 60 or older, rejecting more than 200 qualified applicants. The company paid $365,000 to settle the suit.

In March 2025, the ACLU filed complaints against Intuit and HireVue related to alleged AI-driven hiring discrimination. These complaints remain in earlier stages. Together with Mobley, these cases represent a growing body of litigation testing whether existing civil rights frameworks can adequately address algorithmic bias in employment.

NYC Local Law 144: The Comptroller's Audit

On December 2, 2025, the New York State Comptroller released an audit of NYC's enforcement of Local Law 144 of 2021, the first municipal law in the United States requiring bias audits of automated employment decision tools (AEDTs). The audit (Report No. 2024-N-6) covered the period from July 2023 through June 2025.

The findings were stark. DCWP received only two AEDT-related complaints during the entire audit period. DCWP surveyed the websites and bias audits of 32 companies and found just a single instance of non-compliance. However, the Comptroller's office reviewed the same 32 companies and identified at least 17 instances of potential non-compliance — a dramatically higher number that suggests DCWP's review was not using the formal procedures created by the NYC Office of Technology and Innovation.

The audit concluded that DCWP's complaint-based enforcement model is fundamentally ineffective. The complaint intake process through the 311 system was not properly routing AEDT complaints to DCWP. No additional stakeholder education or outreach had been performed since the law took effect. And DCWP did not consult with OTI's technical experts when making determinations about AEDT use, despite lacking internal technical expertise.

The EEOC's full 21-page amicus brief is publicly available on the [EEOC's website](https://www.eeoc.gov/sites/default/files/2024-04/Mobley%20v%20Workday%20NDCal%20am-brf%2004-24%20sjw.pdf). The three-theory analysis above is drawn directly from the brief text. The July 12, 2024 ruling description is sourced from the May 16, 2025 [GovInfo order](https://www.govinfo.gov/content/pkg/USCOURTS-cand-3_23-cv-00770/pdf/USCOURTS-cand-3_23-cv-00770-0.pdf) referencing prior rulings.