What the Workday AI Lawsuit Means for Small Business Employers

You may not use Workday. You may not use any AI hiring tool at all.

This lawsuit still matters to you.

On June 22, 2026, a federal judge refused to dismiss age, race, and disability discrimination claims against Workday, one of the largest HR software platforms in the world. The case is now moving forward, and the legal reasoning behind it is setting a precedent that will affect every employer who uses any kind of technology in their hiring process, not just Workday customers.

Here is what happened, what it means, and what small business owners should be doing right now.

What Actually Happened

In February 2023, a lawsuit was filed against Workday alleging that its AI-powered applicant screening tools discriminated against job seekers based on age, race, and disability. The plaintiff said he had applied for more than 100 jobs through companies using Workday's platform since 2017 and was rejected from every single one, often within minutes of submitting his application, suggesting the decisions were automated rather than human.

He was not alone. Additional plaintiffs joined with similar claims, and in May 2025 a federal judge certified the case as a nationwide collective action under the Age Discrimination in Employment Act. According to court documents, Workday's software processed approximately 1.1 billion job applications during the period in question. That single statistic explains why this case has the potential to be one of the largest employment discrimination actions in US history.

The most recent development came on June 22, 2026, when Judge Rita Lin denied Workday's motion to dismiss, allowing claims under California's Fair Employment and Housing Act to proceed alongside the federal claims. The case is now moving forward with a ruling expected later this year.

The Part That Should Get Every Employer's Attention

Workday's primary defense has been straightforward: we are a software vendor, not an employer. Our tools do not make hiring decisions. Our customers do.

The court has not been buying it.

According to SHRM, Judge Lin determined in an earlier ruling that Workday could be considered an employer covered by federal anti-discrimination laws because its tools perform screening functions that its customers would otherwise carry out themselves. In other words, when an AI tool screens, ranks, scores, or rejects applicants on your behalf, the law may treat that as your decision, not the vendor's.

That finding has enormous implications. It means that even if you did not design the algorithm, even if you did not intend to discriminate, and even if you had no idea your tool was producing biased outcomes, you may still be legally exposed if the tool you are using produces discriminatory results.

According to a report by the World Economic Forum, approximately 88% of companies are already using some form of AI in candidate screening. That is not a niche technology concern. That is the majority of employers operating in territory where the legal rules are still being written in real time.

What This Means If You Are Not a Workday Customer

The Workday case is the first major federal class action of its kind, but it is not the only one.

Similar lawsuits have been filed against SiriusXM and Eightfold AI, and in May 2026 a case was filed against IBM alleging the company used AI as part of a strategy to push out older workers in favor of younger hires.

The pattern is clear. Courts are no longer treating AI as a neutral tool that insulates employers from liability. They are treating it as a hiring decision that carries the same legal exposure as any other employment action.

If you are using any of the following in your hiring process, this case is relevant to you:

• Resume screening software that filters or ranks applicants automatically

• Applicant tracking systems with AI-powered scoring or matching features

• Chatbots that conduct initial candidate screening

• Any tool that makes or influences a hiring recommendation before a human reviews it

You do not have to be a large company for this to apply. You do not have to be using Workday. You just have to be using a tool that makes decisions about people.

The Compliance Gap Most Small Businesses Have Right Now

Most small businesses that use AI-assisted hiring tools have never asked a single question about how those tools make decisions. They adopted the software because it saved time, and they assumed the vendor handled the compliance piece.

That assumption is no longer safe.

According to SHRM, employers cannot hide behind the automated nature of their hiring tools when those tools produce discriminatory outcomes. The responsibility for what your hiring process produces sits with you, regardless of who built the technology.

The specific legal risks at play in the Workday case touch three federal statutes: the Age Discrimination in Employment Act, which protects workers 40 and older; Title VII of the Civil Rights Act, which prohibits discrimination based on race, color, religion, sex, and national origin; and the Americans with Disabilities Act. These are not new laws. They apply to every employer with 15 or more employees, and in many cases to smaller employers as well. What is new is that courts are now applying them to algorithmic decisions, not just human ones.

What Small Business Employers Should Do Right Now

You do not need to stop using technology in your hiring process. You need to use it more carefully and more deliberately than you probably have been.

Here is where to start:

Know what your tools are actually doing. If you are using an applicant tracking system or any AI-assisted screening feature, find out exactly how it works. What criteria is it screening for? How does it score or rank candidates? Can the vendor explain this to you in plain language? If they cannot, that is a problem worth taking seriously.

Do not let any tool make a final hiring decision. Every rejection, every advancement, every shortlist should have a human being reviewing and confirming it. Automated decisions with no human oversight are exactly what is at the center of the Workday case.

Document your process. If a candidate were to ask why they were not advanced, could you give a clear, documented, non-discriminatory answer? If not, your process has a gap. Every hiring decision should be traceable to a specific, job-related reason.

Review your candidate pool for patterns. If your AI-assisted process is consistently screening out applicants over 40, applicants from certain zip codes, or any other identifiable group, that pattern is worth investigating before it becomes evidence in a lawsuit.

Ask your vendor the hard questions. Has your AI tool been audited for bias? What protected classes has it been tested against? What does the vendor's contract say about liability if the tool produces discriminatory outcomes? Vendor assurances are not the same as documented compliance.

The Bottom Line

The Workday case is not just about one company or one plaintiff. It is about whether the technology employers use to make hiring decisions is held to the same legal standard as the employers themselves. And right now, the answer from the courts is looking increasingly like yes.

Small businesses are not immune from this trend just because they are small. The legal standards that apply to hiring decisions apply regardless of your headcount, and the tools you use in that process are now squarely in the conversation.

You do not have to overhaul your hiring process today. But you do need to know what your tools are doing, who is reviewing their decisions, and whether you could defend those decisions if someone asked.

If you are not sure of the answers, now is the time to find out.

AlphaDog HR Solutions helps small and mid-size businesses build hiring processes that are legally defensible, practical, and built for the way employers actually work. If you are not sure whether your current process is putting you at risk, reach out and let's take a look.