Workday is now facing one of the most important legal tests yet over whether artificial intelligence is quietly reshaping who gets hired, who gets ignored and who may never know why.
A federal judge in San Francisco ruled that Workday must face claims that its AI-powered recruiting software unlawfully screened out job applicants in violation of California anti-discrimination law and the federal Americans with Disabilities Act, according to Reuters. The proposed class action, first filed in 2023, accuses the company’s tools of discriminating against Black applicants, women, people over 40 and applicants with disabilities.
The case centers on Derek Mobley, who says he was rejected from more than 100 jobs at companies using Workday despite being qualified. In an earlier ruling, Judge Rita Lin said the lawsuit plausibly alleged that “Workday’s customers delegate traditional hiring functions, including rejecting applicants, to the algorithmic decision-making tools provided by Workday.”
The newest ruling also allowed claims that Workday’s software may have screened out applicants using “proxy indicators” of disability or illness, including gaps in employment history. However, the judge dismissed a claim involving Asian American applicants on procedural grounds.
Workday denies the allegations. The company said its recruiting tools do not make hiring decisions “in California or anywhere else.”
“Our technology looks only at job qualifications, not protected traits like race, age, or disability. We rigorously test our products as part of our Responsible AI program to confirm our tools do not harm protected groups,” Workday said.
The lawsuit is bigger than one company because AI hiring tools are now deeply embedded in the job market. Surveys show more than 80% of U.S. employers and virtually all Fortune 500 companies use AI tools in hiring. SHRM found that AI adoption in HR tasks climbed to 43% in 2025, up from 26% in 2024.
A ResumeBuilder.com survey of 948 business leaders found that 51% of companies were already using AI in hiring and 68% expected to use it by the end of 2025. Among companies using AI, 82% used it to review resumes, while 21% said they let AI reject candidates at all stages without human review.
That is exactly why critics are sounding the alarm. A Pew Research Center survey found that 66% of U.S. adults would not want to apply for a job if AI helped make hiring decisions. One respondent told Pew, “AI as it is usually applied today looks for specific words or qualifications that often miss the whole picture.”
Civil rights concerns are not new. The EEOC filed an amicus brief in Mobley’s case, and in 2023, the agency announced a $365,000 settlement with iTutorGroup after alleging its hiring software automatically rejected more than 200 older applicants.
Researchers are also finding signs of real-world risk. Stanford HAI reported that AI screening tools can create racial disparities and “systemic rejection” when the same vendor’s system is used across multiple employers. Meanwhile, New York City’s AI hiring law now requires bias audits and applicant notices, though a New York State Comptroller audit found enforcement problems.
For job seekers, the Workday case puts a name on a familiar frustration: applying again and again, getting rejected instantly and never knowing whether a person actually reviewed the application. For employers and AI vendors, it raises a bigger question that could define the future of work: if an algorithm helps decide who gets a chance, who is responsible when that chance is unfairly denied?
