Huge potential for jeopardy with changes to employment laws

The rapid adoption and constant evolution of AI have massive implications for employers and staff yet, from a legislative perspective, the dos and don’ts for employers are vague at best – despite the Government making one of the most significant changes to employment law in several years.

While the recently passed Employment Rights Bill includes several significant provisions, from ‘fire and rehire’ and third-party liability to zero hours and temporary contracts, there’s one element conspicuous in its absence: AI.

So, in what is ironically an information desert, what are the potential impacts, and prospective pitfalls, employers need to consider when it comes to AI?

Employment law frameworks

The Equality Act 2010 and Employment Rights Act 1996 still govern discrimination and dismissal but were not drafted with AI in mind. Even as the Employment Rights Bill becomes law, gaps in legislation remain. So far, the UK has been relatively ‘hands off’ in comparison with the EU, which has moved faster on AI regulation.

It’s highly likely that case law will guide UK tribunals in adapting existing frameworks when it comes to employment law cases involving AI and employers need robust policies in place to support and protect their organisations and staff.

The best way for employers to embrace AI technology in the safest possible way is to set crystal clear AI usage policies covering the tools that can be used along with expectations, and limits, of usage.

Getting caught out by bias

From a legal and regulatory perspective, using AI to speed up the recruitment process still carries risk. Yes, it lessens the potential for personal preference and individual unconscious bias – but it’s worth remembering AI systems display their own unconscious bias. Take Amazon, for example, which was forced to stop using a recruitment tool during testing as it’s algorithm unintentionally discriminated against women by reflecting previous biased hiring patterns.

Similarly, if employers wish to use AI to automate decisions regarding promotion, performance monitoring, or even redundancy, there must be some element of human oversight. Deliveroo, Uber Eats and Estee Lauder have all fallen foul of the law in relation to their use of AI tools – for allocation of shifts, facial recognition sign-ins and assessing interviews to determine redundancy, respectively.

The bottom line is that businesses remain legally responsible for discriminatory outcomes caused by AI. There is no concrete defence for algorithms determining employment outcomes, and decisions must be explainable, transparent and in line with current employment law. The Information Commissioner’s Office guidance indicates that employers need to ensure humans remain involved in the decision-making process, and employers should offer the opportunity for ‘human review’ of AI decisions. Saying ‘the system told me so’, does not provide a safety net or robust defence against potentially costly claims.

Issues in the workplace

The adoption of AI tools must be carried out on a fair and equal basis to avoid performance disparities between employees. There are risks for businesses promoting employees for being better at AI implementation, as opposed to their core role, or failing to give opportunities for advancement for those who aren’t keeping up.

However, the biggest risk on this front – for employers and staff – is the misuse of AI in the workplace. Employees who, for example, try to circumvent or bypass business rules by using AI on personal devices, or share confidential information on AI platforms, could find themselves guilty of misconduct.

For employers the stakes are raised when it comes to harassment. While there are no reported examples in the workplace – yet – the rise of deepfakes and the potential to create and share inappropriate content has given rise to new forms of workplace harassment. Employers are beholden by law to take all reasonable steps to prevent harassment at work, and the misuse of AI in this context only serves to increase employer liability.

Staying on the right side of employment law

AI has the potential to streamline processes, create efficiencies and save on costs, but the legal risks for employers around discrimination and unfair dismissal are heightened. Unlike the emergence of email or social media, the impact of AI is deeper, more far reaching and has the potential to be more disruptive.

Current employment law can stretch to cover many issues but policy clarity, human oversight and proactive risk assessments are critical tools to ensure compliance. The misuse of, or unchecked reliance on, AI can expose employers to uncapped discrimination claims – with the potential to cost businesses dearly, both financially and reputationally.

Originally published in The Herald on 5 February 2026.