Navigating AI in hiring: Legal and ethical considerations

There was a time when I would contact legal and privacy conference organizers and ask why there were no sessions focused on AI, that evolved into attending AI-focused panels and knowing more about the upcoming legislation affecting hiring than some of the speakers on stage. But in 2024, the regulatory firehose has turned on full blast—it can be difficult to keep up. This is a big-picture check-in to help you wrap your head around the current AI in hiring regulatory environment, the challenges companies face in navigating these regulations, and what we can expect in the future.

As a reminder of why all of this is important, three figures from HireVue’s 2024 Global Guide to AI in Hiring stand out:

70% of HR professionals currently use or plan to use AI in the next year.

Your team is using AI now. Being on top of mandates isn’t optional. 

44% of HR professionals worry about biased AI recommendations.

HR leaders know they have to uphold existing fairness standards and want reassurance from new technology. 

42% are concerned about legal compliance with AI.

Compliance is good for business and it should be at the forefront of decision-making for every team in an organization.

The Regulatory Environment in 2024

AI regulations in hiring have garnered attention from policymakers around the globe, and 2024 is proving to be a pivotal year. Governments and regulatory bodies are working to strike a balance between encouraging innovation and protecting individuals from unintended biases or privacy violations that AI could introduce. One of the most significant developments has been the introduction of the European Union’s AI Act, which places strict guidelines on the use of AI in high-stakes decision-making processes, including hiring. 

The Act went into effect on August 1, 2024, establishing strict regulations for AI systems, particularly those deemed high-risk (like in law enforcement or hiring). U.S. tech companies operating in the EU must comply or face fines of up to 7% of their global revenue. The Act focuses on preventing discriminatory outcomes, protecting privacy, and ensuring AI systems do not undermine fundamental rights. Full compliance deadlines will roll out by 2026, reshaping AI practices globally​. We’ve already seen US-based AI laws being explored and have laready passed.

While the United States federal government has yet to pass similarly comprehensive AI legislation, regulatory bodies like the Equal Employment Opportunity Commission (EEOC) closely monitor AI use in hiring. Several states, including California, Colorado, New York, and Illinois, have introduced AI-specific regulations or amendments to existing anti-discrimination laws. For example, New York City’s law requiring bias audits for AI hiring tools is a notable example of localized efforts to ensure that AI enhances fairness rather than exacerbating inequities.

At the federal level, proposed legislation such as the Algorithmic Accountability Act aims to mandate bias audits and impact assessments for AI tools in hiring. While not yet law, these proposals are shaping how companies approach AI governance, encouraging businesses to build bias detection and explainability into their systems from the outset.

Navigating AI Compliance Challenges

To understand how HR professionals are preparing for the changing standards around AI, we asked respondents in our 2024 trends report what they’ve done to ensure compliance:

• 34% have an internal team assessing the compliance of current products
• 27% have done nothing
• 21% have sent requests to vendors for compliance documentation

That 27% who have done nothing? They need to take action now. At a minimum, companies should reach out to their vendors for validation. Understand whether decisions or recommendations are being made by humans or AI. Any ethically-minded vendor  worth partnering with should have substantial documentation available.

Externally audited and explainable processes are an absolute must-have –evidence of these is publicly available 3rd party audit results and an AI Explainability Statement to demonstrate fairness and transparency. They should also be able to share the data privacy standards they adhere to, and if you’ve signed an NDA, a technical report. 

What’s Next for AI in Hiring?

There was a time when using machine learning and artificial intelligence made you an outlier in HR technology, but that’s no longer the case. Today, to fully reap the massive rewards offered by the AI revolution, companies must partner with vendors who prioritize transparency, ethics, and data privacy. However, the real transformation in hiring goes beyond just adopting AI—it’s about a fundamental shift from focusing solely on experience to emphasizing potential.

Human Potential Intelligence offers a new way forward, moving beyond traditional hiring practices to prioritize fairness and objectivity. By leveraging AI to evaluate candidates based on their potential, skills, and interests, companies can replace guesswork with a more nuanced and insightful understanding of each candidate. This approach empowers businesses to identify hidden talent and embrace a more inclusive hiring process.

By leaving behind the “rearview mirror” approach to HR, where decisions are based on past experiences alone, we can use AI to unlock human potential, creating hiring processes that are not only more efficient but also more equitable.