For many job applicants, seeking new employment is a frustrating and demoralizing experience. Between the time spent perfecting a résumé, filling out lengthy applications, and doggedly refreshing your inbox while waiting for a reply, a job search can cause significant stress and anxiety. Rejections can show up abruptly, after an interminable wait, or not at all. To make matters worse, you may have been sunk by inaccurate information or a comment you made on one of your social media profiles.
It’s no secret that artificial intelligence (AI) has assumed an ever-expanding role in hiring decisions at Microsoft, PayPal, and other large firms. A proposed class-action lawsuit filed by a pair of job seekers in California on January 20, 2026, alleges that the AI system used by Eightfold AI, Inc. (Eightfold) illegally harvests applicants' personal data and uses it without their consent during its assessment of candidates’ suitability for particular positions. Likening the AI-generated “match score” produced by Eightfold as under the same legal umbrella as a consumer credit report, the plaintiffs claim that the lack of permission, along with no way for applicants to review or dispute the collected data, is in violation of the Fair Credit Reporting Act (FCRA).
The lawsuit, filed by Erin Kistler and Sruti Bhaumik, is one of the first to challenge the use of AI hiring tools and the privacy and employment laws they may be violating during their contribution to the decision-making involved in the hiring process. For exasperated applicants long vexed by the “black box” system that doesn’t let them know why they didn’t get the job, this could be the first step toward having an actual person view their résumé at some point during the employment process.
Okay, but What if It Adds Hallucinations?
You may not have heard about Eightfold before, but if you’ve applied for a job recently, chances are they’ve heard of you and know about you. Know a lot about you, in fact.
Eightfold uses AI technology to gather information about job applicants seeking employment opportunities with some of the country’s largest firms. The company, a favorite among Fortune 500 firms, claims that its AI-driven algorithmic program collects from over “1.5 billion global data points.” The compiled facts and figures are allegedly sourced from publicly available data on sites such as LinkedIn and social media platforms. Eightfold insists that it does not engage in illegal “scraping” of private or copyright-protected information.
Once gathered, the data is used to assign a rating to each applicant on Eightfold’s 0-5 scoring system. This rating represents each applicant’s likelihood of success at the job title they’re seeking. However, questions have arisen about the accuracy and legality of the data mined to make these determinations.
While Eightfold insists that the information used for the background check is reasonable for employment purposes, the lawsuit claims that the AI company is actually producing a consumer report and is thus subject to the federal laws governing the FCRA. Sharing information gathered in a consumer report without the subject’s consent or permission is illegal under the FCRA. The plaintiffs also charge that, since Eightfold adds information but doesn’t allow applicants access to the report created about them, they have no way to review its contents or to file a request for review or revision to address inaccuracies. This is also a violation of the FCRA.
Isn’t This What Human Resources Is For?
Represented by the law firm Outten & Golden and the non-profit Towards Justice, the plaintiffs are seeking a precedent-setting decision in their favor. For the moment, protections for job seekers under the FCRA are in a legal grey area. The Consumer Financial Protection Bureau (CFPB) released a circular addressing the issue in 2024 that advocated for employers being subject to the rules of the FCRA when using information gathered and shared by third parties. However, the Trump administration rescinded the opinion in May 2025.
In addition to the FCRA, the suit charges that Eightfold’s AI violates the California Investigative Consumer Reporting Agencies Act (ICRAA) and the UCL. Claiming that Eightfold is operating as a Consumer Reporting Agency, the lawsuit seeks a declaratory judgment ruling that Eightfold’s actions are unlawful and an injunction forbidding the continued use of its AI hiring tools until the practices conform under the auspices of the FCRA. The plaintiffs are also requesting certification as a class-action suit and any compensatory and punitive damages awarded by a jury.
For everyone who has ever received a form-letter rejection slip in response to a job application and wondered how they didn’t even rate an interview, the practices Eightfold is accused of engaging in may prove a bit of balm to their ego. While that’s nice, being able to see and correct information about themselves may be more useful in finding new employment.
Related Resources
- Employment Discrimination (FindLaw’s Civil Rights Law)
- What Is the Consumer Finance Protection Bureau? Will It Survive? (FindLaw’s Law and Daily Life)
- Legal Rights During the Hiring Process (FindLaw’s Employment Law)
