Written by: David Frankel, Esq. & Maria Matkou, Esq.
AI is quickly reshaping staffing firms’ practices, offering unprecedented efficiencies and innovations. However, although AI provides staffing firms with tremendous opportunities, AI also brings along some legal challenges. This article aims to identify some regulations pertaining to AI and suggest a way to cover them in the handbook and other policies.
The regulation of AI in the US looks like a patchwork quilt. In October 2023, the President issued an Executive Order setting standards for AI safety and security. Following this, the Department of Labor released AI Principles and Best Practices for employers and developers to build and use AI and two guidance documents to assist federal contractors and employers in complying with worker protection laws as they deploy AI in the workplace. Although these actions are notable steps toward a comprehensive and united approach to deal with challenges brought by AI, they are mostly best practices and principles, not legally binding rules. Moreover, the upcoming administration is expected to repeal most of the AI regulations, making the field even more unpredictable.
Certain states, such as New York, California, Colorado, Massachusetts, and Illinois, also introduced AI regulations. We aimed to summarize some of the most often regulated actions, noting that these laws have certain applicability limitations and might not apply to every employer.
- Non-Discrimination: existing Equal Employment Opportunity Laws already require employers to ensure that their practices do not discriminate based on race, gender, age, disability, or other protected characteristics, including while using AI tools. Some states stepped forward by introducing more detailed legislation. For example, in Colorado, effective February 1, 2026, employers (deployers) must use reasonable care to protect residents from any known or reasonably foreseeable risks of “algorithmic discrimination” (§ 6-1-1701), including regularly testing AI programs. In Illinois, it is illegal 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 for an employer to use AI that has the effect of subjecting employees to discrimination on the basis of protected classes or to use zip codes as a proxy for protected classes (775 ILCS 5/2-102).
- AI Use Notification/Consent: some states require employers to provide notice or seek consent if they use AI in employment decisions (820 ILCS 42/5; C.R.S. 6-1-1703).
- Replica of employees’ voice and likeness: employers must receive employees’ consent, written agreement, or satisfy certain criteria to create or use facial recognition or a digital replica of an employee’s voice or likeness (Md. Labor and Employment Code Ann. § 3-717, Cal. Lab. Code § 927).
A handbook can be a useful tool in helping to address the issues with AI. An employer should include sections in its handbook explaining that it has the discretion to use AI in employment decisions without violating applicable equal employment opportunity laws, defining the AI tools or platforms being used, detailing the scope of their use (e.g., recruitment, screening, background checks), and addressing whether AI will be used for decision-making or recommendations. Separately, if required by law, staffing firms must update their hiring policies and documents to seek the consent of the candidates to use AI in hiring decisions.
Should you need to analyze whether certain state laws cover your staffing firm or improve the AI policies and procedures outlined in the handbook or other documents, please contact our highly experienced Staffing Team at Becker LLC.