As your business grows you may be considering the use of Artificial Intelligence (AI) to help streamline your processes, increase productivity and reduce admin time. There are a wide range of AI-assisted tools available which can help you to perform HR functions from carrying out recruitment tasks to monitoring employee performance and wellbeing.
While there are clearly a number of benefits in using AI, before implementing it’s important to be aware of the potential risks and take steps to manage them.
In this article, our experienced employment law solicitors walk you through the practical and legal considerations.
Contents:
How AI can be used by employers
There are several ways that AI can be used to assist with recruitment and HR processes. These include:
- Recruitment and onboarding – AI tools can carry out various tasks such as screening CVs, ranking candidates, scheduling interviews, and answering questions from job seekers via chatbots.
- Employee management and decision making – AI tools can measure individual employee performance, identify training needs, select candidates for promotion and even identify potential employee relations issues before they escalate.
- Employee monitoring and managing remote workers – tools are available to monitor and track employee attendance and activity, rate employee productivity by monitoring keystrokes and monitor driver behaviour using dashcams and telematics.
- Distribution and allocation of work – these can be helpful to automatically assign employees more shifts or allocate employees with greater capacity additional tasks to enhance staff efficiency and output.
- Data analysis and HR insights – examples include analysing sales calls to improve closing rates, analysing productivity to identify cost-saving measures, using predictive analytics to identify potential equipment failures, and even predicting which employees might leave the business.
What are the risks of AI tools in the workplace?
it’s important to understand the legal risks and obligations that may affect your use of AI. These include:
Employment law risks
Discrimination risks from:
- Algorithmic bias - there is a risk of bias in algorithms and AI creating or replicating existing discrimination: Amazon for example famously had to scrap an AI recruiting tool which taught itself that male candidates were preferable to female.
Existing protections from discrimination under the Equality Act 2010 continue to apply to all forms of AI used in employment, and you should ensure the AI you use is not in breach of that. It could be difficult to defend a discrimination claim if there is limited information about the algorithm used by the AI software. - Digital exclusion -when recruiting for roles there is a risk that employers may favour younger workers in preference to older applicants who they perceive may have more knowledge of AI processes. There is also a risk that highly digital processes could exclude those who are not tech-savvy or don’t have access to technology, whether due to age, disability, or financial circumstances. As well as risking age or disability discrimination, this may also undermine any attempts to build a diverse workforce.
- Automated decision-making - when AI is used to inform decisions about promotions and pay rises this increases the risk of discrimination based on the potential for hidden biases or prejudices within the AI tools.
- Inaccessible technologies - concerns have been raised about AI penalising neurodiverse individuals whose facial expression, eye contact, speech patterns or tone may not fit the profile programmed into the system.
Harassment risks from:
- Deployment of intrusive technologies – there is potential for harassment claims by employees if the use of AI tools has the effect of creating an ‘intimidating, hostile, degrading, humiliating or offensive environment’. An example of this might be facial or speech recognition technologies not recognising an employee with a disfigurement or speech impediment.
Unfair/constructive dismissal/grievances:
- There is a mutual obligation of trust and confidence at the heart of every employment relationship but in situations where is AI potentially making or informing employer’s decisions, the use of incorrect or misinterpreted data could potentially lead to a breakdown of trust and confidence cause with an increased risk of grievances and claims.
- Using AI systems to make material employment decisions (eg denying a bonus) can risk challenges by employees if these decisions are made with heavy reliance on AI. A manager may struggle to explain their decision if they simply do not understand how it was arrived at.
- Use of AI tools in HR processes that don’t meet the standard of reasonableness - Estee Lauder famously had to pay compensation when the firm selected people for redundancy based on automated computer judgments with no human involvement, and Uber had to reinstate drivers and pay fines after their app effectively dismissed drivers without any human oversight
Employee health and safety (eg stress from excessive monitoring) the general principles of Health and Safety will extend to the use of AI in the workplace and so the same considerations that would usually apply when assessing health and safety risks should apply to the use of AI.
Corporate risks
- Confidentiality: employees inputting company confidential information into generative AI tools pose a huge risk that the information will become publicly available and importantly will lose its confidential status and protections.
- Copyright infringement: using generative AI platforms to generate content such as marketing materials, translations or source codes could lead to various copyright issues as to the originality of the outputs and the ownership of any resulting copyright.
What’s the current regulatory framework around AI?
There are no specific laws governing AI in the UK at present and existing intellectual property, data protection and employment laws currently address the issues.
It was announced in the King's Speech in July 2024 that the labour government will ‘seek to establish the appropriate legislation to place requirements on those working to develop the most powerful artificial intelligence models.’ Peter Kyle, the Secretary of State for Science, Innovation, and Technology has announced that we can expect new UK AI law in 2025. There are currently proposals for AI regulation in the form of The Artificial Intelligence (Regulation) Bill which would create a new UK Artificial Intelligence “AI” regulator, creation of Chief AI Officers, and mandate the introduction of further AI regulation.
In November 2024 the Information Commissioner's Office (ICO) issued an audit outcomes report on AI tools in recruitment, along with six key questions organisations should ask before procuring an AI tool for recruitment.
What can employers do to manage the risks?
- Transparency on how the business uses AI: employees and job applicants have the right to be told if you use AI tools and how AI will be used to process their personal data. They also need to be told they have the right to challenge any automated decision making.
- Cultural alignment at the top on use of AI at work: Without proper leadership and communication, the introduction of AI can cause apprehension among employees so it is important that business leaders ensure that all staff members understand how AI will be integrated and how their roles may evolve, highlighting that AI is a tool to enhance and not replace human capabilities.
- Risk Assessment: Before you start using AI tools you will need to carry out a Data Protection Impact Statement (DPIA) to help you meet your obligations under data protection law. You must do this before implementing any AI tools into your business. The DPIA should also be re-visited regularly and kept up to date. This step is a fundamental part of your accountability obligations under data protection laws.
- Consult with staff on new technologies if required: before implementing any new technology it’s important to involve employees in the decision-making process by seeking their feedback, opinions, and concerns before making a final decision. If your organisation has any collective agreements in place with trade unions or works councils then this is a legal requirement.
- Carry out thorough due diligence when procuring AI tools for the workplace: all processing of personal information must be done in a manner that is fair by monitoring for potential or actual fairness, accuracy or bias issues in the tools and the outputs. Clear assurances should be provided by the AI provider ensuring they have mitigated bias and that they can provide evidence of such. Organisations intending to use AI tools and AI providers have data protection compliance responsibilities which should be set out in any written terms and conditions.
- Update your data privacy policies to include any AI tools in use: you will need to ensure that employees are informed of any new AI technologies being used for HR decisions in your privacy policy. It’s best to have a separate privacy policy for job applicants with additional details about the AI platform being used for recruitment decisions such as how and why the tool is being used and the logic used by the tool in algorithms.
- Consider an AI policy and update existing IT policies: it’s important to have an AI policy in place so that all staff are aware of what is and isn’t acceptable use of AI in their role. This should include which AI tools they can and cannot use, what tasks they can use AI for, and importantly measures to protect confidential information and personal data. For more details take a look at our recent article AI policies.
- Ensure any automated decision making complies with data protections laws: if you are considering using AI to undertake automated decision making or profiling, assess whether the decisions will have a legal or otherwise significant impact on individuals. If so, human involvement must be built in.
- Maintain human involvement (especially for high-stakes decisions eg dismissals): don’t rely entirely on AI to make decisions. Always double-check important decisions when recruiting, undertaking performance reviews or dismissing employees.
- Train staff: to recognise the data protection risk of using AI software and take security measures to protect personal data.
There is little doubt that AI is the future and used effectively it can have huge benefits for many businesses, but a cautious approach is needed particularly when using it to assist with HR and recruitment decisions. By understanding the risks and taking some sensible precautions, you can use AI to its full potential.
If you are getting ready to launch AI into your business or are already using it and are looking for guidance , our expert employment lawyers can help you protect your business and your workforce from any associated risk.
