April 11 (Reuters) - The U.S. Equal Employment

Opportunity Commission has told a federal judge that human

resources software firm Workday must face a proposed class

action alleging that it violated federal anti-bias laws by using

artificial intelligence-powered software to screen out job

applicants for other employers for discriminatory reasons.

The commission in an amicus brief filed Wednesday in San

Francisco federal court argued that Workday may qualify as an

"employment agency" subject to Title VII of the Civil Rights Act

of 1964 and other laws because its software determines whether

many applicants are ever considered for jobs at all.

The brief came in a novel lawsuit filed last year by Derek

Mobley, who claims he has been turned down for more than 100

jobs he applied for using Workday's platform because he is

Black, over 40, and has anxiety and depression.

The EEOC in its brief urged a federal judge to reject

Workday's pending motion to dismiss the case on grounds that it

is not an employer or employment agency under Title VII and laws

banning discrimination based on disability and age.

"Mobley has plausibly alleged that Workday's algorithmic

tools perform precisely the same screening and referral

functions as traditional employment agencies - albeit by more

sophisticated means," EEOC lawyers wrote in the brief.

The commission did not take a position on the merits of

Mobley's claims.

In a statement, a Workday spokesperson said the lawsuit

lacks merit and pushed back against the claim that the company

is comparable to a staffing agency, saying Workday designs

products that can be configured by individual customers.

"We do not have oversight or control of our customers' job

application processes, and likewise, our customers do not

delegate control to us in regards to their hiring processes,"

the spokesperson said.

U.S. District Judge Rita Lin is scheduled to hold a hearing

on May 7 on Workday's motion to dismiss.

Lin dismissed the original complaint in January, saying it

lacked specifics about how Workday procures employees for other

companies, which is required to show that the company is an

"employment agency" covered by Title VII. The judge gave Mobley

a chance to file an amended complaint fleshing out the claims.

He did so in February, saying that by using Workday's

platform, employers are essentially handing over their authority

to make hiring decisions to the company.

Mobley says he was directed to a Workday website to apply

for jobs with Hewlett Packard, Comcast, Duke Energy, Equifax and

Experian, among other companies. He was rejected each time,

often within hours of applying, even though he met or exceeded

the requirements for the positions, according to the complaint.

Mobley is seeking to represent classes that could include

tens of thousands of people, according to the complaint. The

lawsuit seeks unspecified compensatory and punitive damages.

Numerous surveys have found that roughly 80% of U.S.

employers, and virtually all Fortune 500 companies, use AI in

the hiring process. That includes using software made by Workday

and other firms that can review large numbers of job

applications and screen out applicants for a variety of reasons.

Government agencies and worker advocates have expressed

concerns that AI tools can discriminate against job applicants

when they are built using data that reflects existing biases.

The EEOC has warned employers that they can be held legally

liable if they fail to prevent screening software from having a

discriminatory impact.

But there has been little litigation thus far over

employers' use of the tools, which experts have said could be

due to many job applicants not knowing when employers use AI

software and the complexities of suing over cutting-edge

technology.

The case is Mobley v. Workday Inc ( WDAY ), U.S. District Court for

the Northern District of California, No. 3:23-cv-00770.

For Mobley: Lee Winston and Roderick Cooks of Winston Cooks

For Workday: Julie Totten of Orrick, Herrington & Sutcliffe

Read more:

Tutoring firm settles US agency's first bias lawsuit

involving AI software

Workday accused of facilitating widespread bias in novel AI

lawsuit

(Reporting by Daniel Wiessner in Albany, New York)