Illinois AI Bias Law Shows States Zeroing In On Workplaces

A new Illinois law upping the legal protections for job candidates and employees evaluated by artificial intelligence signals that workplaces will continue to be at the center of the state-led campaign to curb AI bias, experts said.

H.B. 3773, which was signed Aug. 9 and will go into effect in 2026, amends the Illinois Human Rights Act to make clear that the statute is triggered when discrimination emanates from an employer's use of AI in a broad field of workplace decisions, including related to hiring, firing, discipline, tenure and training.

The measure also requires companies to notify workers when AI is plugged into this wide array of decisions, and bars companies from using ZIP codes in the calculus.

Employment law attorneys told Law360 that the law solidifies Illinois' position as a front-runner in the growing field of states imposing rules on employers' use of algorithmic tools.

"What this shows is that the states are taking the lead on AI, and Illinois is out front," said David J. Walton, a partner at Fisher Phillips and head of the firm's artificial intelligence team.

For the increasing number of employers tapping into AI for personnel tasks, H.B. 3773 indicates that state-level oversight will only ramp up, said Amy de La Lama, a Colorado-based partner at Bryan Cave Leighton Paisner LLP who is the global leader of the firm's technology, commercial and government affairs practice.

"It's a sign that, while a slew of proposed legislation has come and gone in the last few years, we're starting to see these bills passed and come into force," she said. "And it really highlights that one of the early areas of focus will be discrimination in employment."

Notice Mandates Are Top-of-Mind

The expansion of notice requirements in the new Illinois law highlights that transparency in AI use remains a key priority for state lawmakers, experts said.

"The thing that we see the most is notice that AI is being used. That's one thing you see in a lot of this legislation," said Melanie L. Ronen, a management-side employment partner at Stradley Ronon Stevens & Young LLP.

In 2019, Illinois' Legislature passed the Artificial Intelligence Video Interview Act, which set out disclosure and consent requirements when companies use AI to evaluate job seekers' video submissions.

Illinois' latest addition to its AI regulation regime broadens the notice requirement to situations when AI has a say in "recruitment, hiring, promotion, renewal of employment, selection for training or apprenticeship, discharge, discipline, tenure, or the terms, privileges, or conditions of employment."

Maryland, Colorado and New York City have also imposed notice requirements on companies that use AI to vet candidates or for other workplace processes.

California lawmakers are mulling a similar mandate; a bill currently in committee would require employers to let workers know if an automated tool is used in "a consequential decision."

This frequent thread in the emerging regulations will continue to pop up, experts said.

"I do think that this is going to be common, this notice requirement. At a minimum, it's trying to give employees the opportunity to be aware of the use of AI," said LaKeisha M.A. Caton, a Pryor Cashman LLP partner who co-leads the firm's discrimination and harassment practice.

Regulation Is "Revolutionary"

Beyond notice mandates, experts pointed out that the provision in H.B. 3773 regarding ZIP codes is unique, and its enactment likely has placed it on other lawmakers' radar. The new law bars employers from using ZIP codes "as a proxy for protected classes," meaning companies can't have an AI tool consider this data point in screening resumes, for example.

Management-side employment lawyers said this is an unprecedented step.

"It's the first time that I'm aware of that there's a law that says you can't use ZIP codes as a proxy for protected classes," said B. Stephanie Siegmann, a litigation partner at Hinckley Allen & Snyder LLP who co-chairs the firm's cybersecurity, privacy and data protection group. "This is somewhat revolutionary."

Civil rights advocates lauded this inclusion.

Peter Hanna, a legal adviser to the American Civil Liberties Union of Illinois on privacy, surveillance and technology, said ZIP codes can "clearly" be used as a proxy for race, socioeconomic status or other protected characteristics, and plugging this factor into a workplace decision can yield "potentially discriminatory outcomes."

Although this type of safeguard is not yet the norm, Hanna said Illinois could kick off a trend.

"There is a lot of activity around AI legislation at the state level, and we expect other states to follow Illinois' lead here," Hanna said.

Matt Scherer, senior policy counsel for workers' rights and technology at the Center for Democracy and Technology, said he hopes the ZIP code provision is just a springboard for further regulation on the use of proxies.

"I actually am a little concerned that the fact that the law focuses only on ZIP codes sends a signal that that's the only proxy that we should be worried about," he said. "That is not the case."

For example, he said degrees from certain colleges or other educational experiences can be proxies for a wide array of protected characteristics, including race, sex, disability, national origin or immigration status.

"Hopefully, this is just the first step toward closer scrutiny of data-driven tools that claim to be predicting the ability to perform the job but that are really just picking up on demographic and cultural patterns in the workforce," Scherer said.

Smooth Path A Harbinger

H.B. 3773 breezed through the Illinois Legislature. In April, it passed the House 106-0, with one Democrat voting present, and cleared the state's upper chamber 57-0 the following month.

Experts said this trajectory bodes well for another, broader AI measure moving through the statehouse.

H.B. 5116, which is dubbed the Automated Decision Tools Act and was introduced in February, would require "deployers" of automated decision-making tools to conduct impact assessments on the technology.

The analyses would have to be turned over to the state, which would be able to file suit if any disparities surface. Those deploying automated decision-making tools would also be required to establish "technical safeguards" to mitigate any possible discrimination.

H.B. 5116 specifically calls out employment-based decisions in its coverage, including decisions on pay, promotion, hiring, firing and task allocation.

Brandon L. Spurlock, a Chicago-based employment litigator at Duane Morris LLP, said if passed, the bill will be "even more comprehensive" than H.B. 3773, making it a proposal to keep an eye on.

"Seeing how the Illinois Legislature deals with H.B. 5116 is another thing to watch," he said.

Walton, of Fisher Phillips, said H.B. 3773's pathway to enactment demonstrates the strong appetite from lawmakers in Illinois and beyond for imposing constraints on AI in workplaces.

"I think it means [H.B. 5116] will pass and many others like it by other states," he said. "There is a wave of this type of regulation coming from states."

--Additional reporting by Patrick Hoff, Vin Gurrieri, Allison Grande and Amanda Ottaway. Editing by Bruce Goldman and Nick Petruncio.

For a reprint of this article, please contact reprints@law360.com.