The Algorithmic Boss – When Your Manager is AI, Who Takes the Blame for the Layoffs?

Legal repercussions for all of this could still be imminent. The events here are recent and happening quickly, and courts typically take a few years to catch up. However, a number of states have already started preparing. Employers must take precautions against algorithmic discrimination under Colorado’s AI Act, which goes into effect in June. AI-driven discrimination in hiring decisions is completely prohibited in Illinois. Since 2023, bias audits on automated hiring tools have been mandated by New York City. With a 90-day notice requirement, a California bill that is currently pending would specifically extend WARN Act protections to layoffs caused by artificial intelligence. A corporate practice that has been moving quickly and leaving little paperwork behind seems to be something that lawmakers are rushing to catch up with.

According to Marissa Mastroianni, an employment lawyer at Cole Schotz, when a company fires employees due to AI and then rehires them for the same positions two months later, employees begin to question whether the explanation was genuine or if it was a cover for something else that uncomfortably resembles discrimination. The algorithmic justification becomes a liability rather than a defense if only younger employees or members of particular demographics are asked to return. Executives will claim that the algorithm made the choice. Eventually, though, courts will question who instructed the algorithm to make its decision.

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