New Limits and Liabilities For Illinois Employers That Use AI In Their Hiring and Employment Practices

Any hiring manager or employer who has had to sift through a mountain of resumes, engage in time-consuming screening, or conduct countless interviews understands the appeal of utilizing artificial intelligence (AI) to streamline the hiring process and efficiently deliver a manageable pool of candidates worth a second look.

While the widespread use of AI and other technology by employers and third-party staffing services may make hiring and employment decisions less burdensome, it has also raised concerns among experts and legislators that AI tools and the algorithmic decision-making that defines them can lead to discriminatory effects and outcomes by improperly – and illegally - excluding qualified candidates and reinforcing prejudicial biases.

That is why efforts are being made at the federal, state, and local levels to install anti-discrimination guardrails and require more transparency regarding the use of AI in hiring and employment decisions. This includes recently passed amendments to the Illinois Human Rights Act (IHRA), effective January 1, 2026, that impose significant new limitations and requirements on employers as to their reliance on artificial intelligence.

With the changes contained in HB3773, signed into law by Gov. JB Pritzker on August 9, 2024, Illinois joins other states, including Utah and Colorado, in attempts to establish a legal framework around AI’s rapidly expanding presence in hiring and employment. The amendments also build on the extensive guidance and Q&As issued by the Equal Employment Opportunity Commission (EEOC) in May 2023 that addressed the discriminatory risks associated with the use of AI hiring technologies. As the EEOC framed the issue, "Even where an employer does not mean to discriminate, its use of a hiring technology may still lead to unlawful discrimination" that violates Title VII of the Civil Rights Act and equivalent state laws such as the IHRA.

The law applies to any employers employing one or more employees within Illinois during 20 or more calendar weeks during the calendar year. Notably, while the amendments make employers liable for any violations of these new provisions, they do not expressly extend that liability to third-party recruiting or employment agencies. As a result, if you use third parties in recruitment, hiring, or staffing, you need to know whether your vendors use AI in any of their practices in order to best protect yourself when the law becomes effective.

Discriminatory Effects About Use of AI Are Civil Rights Violations

With respect to recruitment, hiring, promotion, renewal of employment, selection for training or apprenticeship, discharge, discipline, tenure, or the terms, privileges, or conditions of employment, the amendments make it a civil rights violation under the IHRA “for an employer to use artificial intelligence that has the effect of subjecting employees to discrimination on the basis of protected classes under this Article or to use zip codes as a proxy for protected classes under this Article.”

Notice of AI Use

The law also requires that employers provide notice to employees if the organization uses AI for the following employment-related purposes: recruitment, hiring, promotion, renewal of employment, selection for training or apprenticeship, discharge, discipline, tenure, or any of the terms, privileges, or conditions of employment.

An employer commits a violation if it fails to provide an employee notice that it is using AI for any of the foregoing purposes. It is not clear yet how the notice should be drafted and disseminated.

Broad Definition of AI

The amendments include an expansive definition of AI that could lead to violations if they have a discriminatory impact. Specifically, “artificial intelligence” means “a machine-based system that, for explicit or implicit objectives, infers, from the input it receives, how to generate outputs such as predictions, content, recommendations, or decisions that can influence physical or virtual environments.” The definition explicitly includes "generative artificial intelligence.”

Detailed Rules Forthcoming

The AI amendments to the IHRA were written in fairly broad strokes, leaving significant ambiguities as to what will constitute discriminatory effect or disparate impact, when and how notice must be provided, and other issues. That is, in part, by design, as the law directs the Illinois Department of Human Rights to adopt any rules necessary for the implementation and enforcement of the amendments, “including, but not limited to, rules on the circumstances and conditions that require notice, the time period for providing notice, and the means for providing notice.”

What Employers Should Do Now

The long runway until the amendments’ January 1, 2026 effective date gives employers ample time to audit their use of AI, including use by any third-party vendors, in their hiring and employment practices to ensure that the algorithms and other decision-making mechanics do not lead to any discriminatory outputs. Much will depend on the forthcoming rules to be issued, and we will provide updates as needed to help our clients prepare for and comply with the evolving legal framework governing AI.

If you have any questions regarding your company’s use of AI in hiring and employment or about these recent changes in the law, please communicate with your contact at Latimer LeVay Fyock for assistance.