Workday is pushing back against the AI discrimination lawsuit it faces by moving to dismiss the case, arguing California’s civil rights law should not apply to the class action claims.
During a recent hearing, attorneys representing the company argued that California’s Fair Employment and Housing Act (FEHA) should not govern claims involving employers, applicants, and hiring decisions that take place outside the state. The argument marks the latest development in the Mobley v. Workday case, which has become one of the most closely watched legal challenges involving AI in recruitment.
The case was initially brought by applicants who claim Workday’s screening technology unfairly excluded candidates from employment opportunities. While the allegations themselves have attracted significant attention, the latest proceedings shift focus to a different question: whether a California-based software provider can be held liable under California law for employment decisions affecting workers and employers located elsewhere.
A Growing Legal Challenge for AI Hiring Tools
The lawsuit centers on claims from lead plaintiff Derek Mobley and other applicants over the age of 40 who allege they repeatedly applied for jobs through systems using Workday’s platform but were not selected for interviews. The plaintiffs argue that the company’s automated screening processes disproportionately disadvantaged older applicants, as well as individuals from other protected groups.
The case gained additional momentum last month when a US District Judge conditionally certified a class consisting of individuals over 40 who applied for jobs through Workday’s platform and were denied employment between September 2020 and the present. That decision significantly expanded the potential scope of the litigation.
Workday maintains that its recruiting technology evaluates job-related qualifications rather than protected characteristics and has consistently denied the allegations. The company has also emphasized that its tools are designed to operate with human oversight rather than independently making hiring decisions.
The broader significance of the case extends beyond the claims themselves. According to Riaan Janse, Founder of TalentHubiQ, the litigation has already challenged assumptions about where responsibility lies when organizations deploy AI-driven hiring systems:
“In Mobley v. Workday, the court permitted an age-discrimination collective to proceed against Workday itself, on the theory that an AI screening tool acts as an agent of the employers who use it. It has since expanded to reach the employers, more than ten thousand of them, running candidates through those AI features.”
“The detail most people skip: you cannot outsource the liability. Buying the tool doesn’t move the risk to the vendor. It spreads it across everyone in the chain.”
Where Does AI Governance Actually Apply?
While much of the public discussion has focused on allegations of algorithmic bias, the latest hearing highlights an equally important issue for enterprises: determining which jurisdiction’s laws govern AI systems.
Workday’s legal team argued that applying California law solely because the company is headquartered in the state could create significant complications. Under that interpretation, organizations operating elsewhere could become subject to California employment regulations simply because they use software developed by a California-based provider.
The plaintiffs, however, contend that California law should apply because the technology itself was developed and managed within the state. Their position reflects a growing view among regulators that AI developers should bear responsibility for how systems are designed, tested, and deployed, regardless of where customers ultimately use them.
The debate exposes a broader governance challenge facing enterprises. Modern AI systems often involve software developed in one location, hosted in another, and deployed by organizations operating across multiple states or countries. As adoption accelerates, questions inevitably arise about whether accountability should rest with the vendor, the employer, or both.
For organizations investing heavily in AI-enabled recruitment and workforce management tools, the uncertainty creates practical concerns. If courts increasingly tie legal obligations to where software is developed, companies may find themselves navigating overlapping regulatory frameworks. Conversely, if responsibility rests entirely with employers, enterprises could face heightened compliance burdens even when relying on third-party technology providers.
A Decision That Could Shape Future AI Regulation
There is no indication of when a ruling will be made on this appeal. However, the decision is likely to be closely monitored by technology vendors, employers, legal experts, and policymakers alike.
Regardless of the outcome, the case is becoming an important test of how courts approach AI accountability.
The discussion is no longer limited to whether algorithms can produce discriminatory outcomes. It is increasingly focused on defining who bears responsibility when those outcomes are alleged to occur and which legal frameworks should govern them.
That question is particularly relevant as enterprises continue deploying AI tools across hiring, workforce management, customer service, and other business functions. Organizations are moving faster than lawmakers in many jurisdictions, leaving courts to address complex governance issues on a case-by-case basis.
For now, the Workday litigation remains unresolved. Yet the latest arguments suggest the case may ultimately help establish precedents that extend far beyond recruitment technology.
