A Guide for New Jersey Employers on AI + Workplace Algorithmic Discrimination Risks

In January 2025, the New Jersey Division on Civil Rights (DCR) issued guidance explaining the New Jersey Law Against Discrimination (LAD) applies equally to decisions made with the assistance of artificial intelligence (AI). Employers cannot avoid liability because an algorithm, not a person, made or influenced an employment decision is the message.

Algorithmic discrimination occurs when an automated decision-making tool results in discrimination based on a protected characteristic, such as race, sex, age, disability, religion, national origin, or another classification protected under the LAD. According to the DCR, these tools include technologies that use AI, machine learning, or predictive analytics to assist with employment decisions.

Bias can arise for several reasons, including flawed system design, biased training data, or the manner in which the technology is implemented. As a result, even facially neutral AI tools may unintentionally disadvantage certain groups.

The DCR emphasizes that employers remain responsible for employment decisions made with the assistance of AI. If an automated tool causes disparate treatment, creates an unlawful disparate impact, or interferes with an employee’s right to a reasonable accommodation, an employer may face liability under the LAD. Importantly, using a third-party vendor does not necessarily shield an employer from responsibility.

New Jersey is not alone in scrutinizing the use of AI in employment decisions. New York City has implemented one of the nation’s most comprehensive AI hiring laws, requiring employers using certain automated employment decision tools to conduct independent annual bias audits, publish audit summaries, and provide advance notice to applicants and employees before using those tools. 

Connecticut is also moving toward increased regulation of high-risk AI systems, including those used in employment. Signed into law, Senate Bill No. 5 regulates the use of automated employment-related decision technologies by requiring employers to notify applicants and employees when AI materially influences employment decisions and to disclose the categories and sources of personal data used by those systems. It also expressly prohibits the discriminatory use of AI in employment decisions, reinforcing that employers are accountable for ensuring automated tools comply with existing anti-discrimination laws.

Together with New York City’s bias-audit requirements and New Jersey’s DCR guidance, Connecticut’s law reflects a broader trend toward increased transparency, accountability, and oversight of AI in the workplace. 

These jurisdictions join a growing number of states, including Illinois, Colorado, and California, that have enacted or are actively pursuing legislation governing the use of AI in employment decisions.

As employers continue integrating AI into workplace decision-making, they should take proactive steps to ensure these technologies are used responsibly. Some considerations include:

• Understanding how AI tools make recommendations;
• Working with vendors that regularly test for bias;
• Periodically auditing AI-generated outcomes for potential disparities;
• Maintaining human oversight over significant employment decisions; and
• Ensuring employees and applicants can request reasonable accommodations when automated systems are involved.

AI can be a valuable tool for employers, but it is not a substitute for compliance with anti-discrimination laws. The same legal standards under the LAD apply whether an employment decision is made by a supervisor or assisted by AI. Employers should regularly evaluate their use of automated decision-making tools to help minimize legal risk while taking advantage of evolving technology.