On August 1, 2024, the EU Artificial Intelligence Act (“AI Act”) entered into force. The AI Act introduces a risk-based legal framework for AI systems that fall into four main buckets: (i) prohibited AI systems, (ii) high-risk AI systems, (iii) AI systems with transparency requirements, and (iv) general-purpose AI models. The AI Act applies to companies that are located in the EU. In addition, the AI Act has an extraterritorial reach. It applies to so-called AI “providers”, which are companies that develop and place AI systems on the EU market (including general purpose AI models) or put AI systems into service in the EU under their own name or trademark, irrespective of the provider’s location. The Act further applies to any situation where the output of the AI system is used in the EU, regardless of where the provider or deployer of the concerned AI system is located.

The AI Act’s obligations will become applicable in phases. The provisions with respect to prohibited AI systems and AI literacy (see below) will become applicable on February 2, 2025. Specific obligations for general-purpose AI models will become applicable on August 2, 2025. Most other obligations under the AI Act, including the rules applicable to high-risk AI systems and systems subject to specific transparency requirements, will become applicable on August 2, 2026. The remaining provisions will become applicable on August 2, 2027.

How the AI Act Applies in Recruitment and Employment

The AI Act introduces obligations for high-risk AI systems that require preparation, implementation and ongoing oversight. Under Article 6(2) and Annex III of the AI Act, high-risk AI systems include:

• AI systems intended to be used for the recruitment or selection of individuals, in particular to place targeted job advertisements, to analyze and filter job applications, and to evaluate candidates; and
• AI systems intended to be used to make decisions affecting terms of work-related relationships, the promotion or termination of work-related contractual relationships, to allocate tasks based on individual behavior or personal traits or characteristics, or to monitor and evaluate the performance and behaviors of individuals in such relationships.

Therefore, employers deploying AI systems for candidate screening, employee evaluation, and other employment-related decision-making in the EU must take appropriate steps to comply with the AI Act’s requirements related to the use of high risk AI systems. There are, of course, other scenarios where the use of AI in the workplace could trigger certain obligations, but these are the most obvious and are those that will be most relevant to employers based on current-use cases.

Key Obligations Regarding High-Risk AI Systems

Employers who deploy high-risk AI systems in their HR activities must comply with the following key deployer obligations under the EU AI Act:

• Transparency: Employers must inform candidates and employees about the use of a high-risk AI system in recruitment and employment, explaining how the AI system will function and how decisions will be made. Individuals have the right to request explanations on the role of the AI system in the decision-making procedure and the main elements of the decision taken.
• Data Management: If employers exercise control over the input data used in high-risk AI systems, they are required to ensure that the AI system training data is relevant and sufficiently representative (i.e., accurate and without bias) to prevent discriminatory outcomes.
• Monitoring: Employers using high-risk AI systems in recruitment and employment must continuously monitor the operation of those systems following the instructions provided by the AI system’s provider, and identify any risks arising from their use.
• Human Oversight: Employers must ensure appropriate human oversight over the operation of high-risk AI systems for recruitment and employment activities to ensure fairness and accuracy.
• Data Protection Impact Assessment (DPIA): Where a high-risk AI system processes personal data, employers are required to conduct a DPIA under Article 35 of the EU General Data Protection Regulation (GDPR). The DPIA should evaluate the potential impact of AI systems on individuals' rights and freedoms and propose mitigation measures, where necessary. In conducting a DPIA under the GDPR, the AI Act requires that deployers (employers) must use the information that the provider of the high-risk AI system must provide to deployers under the AI Act.
• AI Literacy: Effective as of February 2025, employers must ensure that staff members and other persons dealing with the operation and use of AI systems on their behalf have a sufficient level of AI literacy, tailored to their technical knowledge, experience, education, and the context in which the AI system is used. Essentially, employers must implement robust, up-to-date AI Act training programs to meet this requirement. This is a general requirement applicable to any AI system and is not specific to high-risk AI systems.
• Workers’ Representatives: Employers using high-risk AI systems in the workplace are required to inform workers’ representatives and the affected workers before deployment. This will likely coincide with existing works council obligations.

If a company is a “provider” of high-risk AI systems for use by deployers (employers) in their HR activities, it will be subject to more stringent ”provider” obligations under the EU AI Act. This includes conducting conformity assessments, establishing and implementing a comprehensive risk management system throughout the lifecycle of the AI system, implementing data quality, data governance and data management requirements, maintaining comprehensive technical documentation of the AI system, providing adequate information to deployers of the high-risk AI system about how to operate the system safely (instructions for use), and implementing post-market monitoring. 

Non-compliance with the AI Act can result in complaints, investigations, fines, litigation, operational restrictions and damage to a company’s reputation. The GDPR continues to apply where AI systems process personal data.

Conclusion

Companies that use AI systems in the context of their human resources activities should take proactive steps to review their AI practices in light of the new requirements under the EU AI Act. This is required both to comply with the new law and to build trust with candidates and employees. Employers should implement the necessary compliance measures, such as drafting or reviewing AI governance policies and procedures and ensuring human oversight and transparency. The requirement to ensure AI literacy of staff members will take effect sooner than other obligations and should be prioritized, where possible.