Artificial intelligence and employment law

17 December 2025

As artificial intelligence continues to reshape the modern workplace, its integration into employment practices raises complex legal questions. AI is infiltrating the workplace from recruitment to performance management and beyond, writes Kathryn Walters (pictured), of Clarke Willmott.

Understanding the evolving legal landscape regarding this rapidly growing phenomenon is therefore essential for employers, to ensure compliance, fairness and the ethical use of AI systems.

The rise of AI in employment

AI tools are now embedded across the employment lifecycle. Employers use algorithms for:

• Automated CV screening and candidate matching
• Employee monitoring and productivity analysis
• Predictive analytics for workforce planning
• Performance evaluations and training recommendations

While these innovations promise efficiency and cost savings, they aren’t without risk. Employers could be exposed to challenge around bias, privacy and accountability.

Legal frameworks governing AI use

In the UK, currently there is no single, comprehensive AI law. To date the UK has adopted a pro-innovation, non-statutory approach, instead relying on existing regulators to oversee the use of AI in their areas while following five broad principles: safety, transparency, fairness, accountability and contestability.

However, existing legislation also governs AI use in employment:

• UK GDPR and the Data Protection Act 2018 – these laws regulate personal data processing, including biometric data and automated decision-making. Employers must ensure that AI systems do not make decisions with “legal or similarly significant effects” without meaningful human oversight.
• The Data (Use and Access) Act 2025 – this new legislation allows automated decision-making under strict safeguards, such as transparency, human input and challenge mechanisms.
• The Artificial Intelligence (Regulation) Bill – reintroduced this year, this Private Members’ Bill proposes an AI authority, mandatory audits and designated AI officers within organisations. Though not yet law, it signals growing momentum for statutory oversight.

In contrast to the UK, the EU has enacted specific legislation to deal with AI. The EU AI Act, effective since August 2024, categorises AI tools used in recruitment and performance management as “high-risk.” UK employers operating in or with the EU must comply with the stringent requirements of this Act, including transparency, risk assessments and human oversight.

It is highly possible that the UK Government’s “pro-innovation” approach will evolve as public concern and international pressure grow regarding the use of AI in the workplace. Indeed, Labour’s manifesto and the King’s Speech signal a shift toward binding regulation for powerful AI models.

Consequently employers should prepare for more robust legal frameworks in the coming years. Preparation will therefore be key to ensure they keep pace with this constantly changing landscape.

Key legal risks and considerations

• Bias and discrimination

AI systems trained on biased data can perpetuate discrimination. It will therefore be necessary for employers to audit AI systems for fairness and accessibility and to ensure compliance with anti-discrimination laws. While there is currently limited case law on AI, automated decision making in the workplace, and the potential for this to result in unfairness and discrimination, the case of Manjang v Uber Eats UK Limited and others, is a stark reminder of the importance of ensuring that AI is fit for purpose, non-discriminatory and free from bias.

In this case Uber Eats made a financial settlement to one of its drivers in response to his claims that AI facial recognition checks required to access Uber Eats’ platform were racially discriminatory after he experienced continuous difficulties with the company’s verification checks.

• Privacy and surveillance

AI-powered monitoring tools can track keystrokes, location data and even facial expressions. Under UK law, such surveillance must be necessary, justified and proportionate. Employers must conduct impact assessments and inform employees about monitoring practices.

• Transparency and accountability

Employees have the right to understand how decisions affecting them are made. Employers should provide clear notices when AI is used, allow individuals to challenge decisions and maintain human oversight in critical processes.

• Employment relationship

The relationship between employer and employee is one of personal service, requiring a degree of mutual trust and confidence between the parties, and this includes being able to explain decisions. However, if either party substitutes AI decision-making for their own judgment, there is potential for this to undermine the legal basis of the employment contract.

Practical steps for employers

To navigate this evolving landscape, employers should undertake the following steps:

• Conduct AI audits – regularly assess AI systems for bias, accuracy and compliance
• Update policies – put in place a specific AI policy and ensure that existing data protection, recruitment and monitoring policies are updated to reflect AI use
• Train staff – deliver regular training sessions to build awareness of legal obligations and ethical considerations, which will also help with consistent use and application throughout the organisation
• Take legal advice – as the pace of development and use of AI in the workplace accelerates, so too will the legal position and employer obligations. Get in touch with us to ensure you have the up-to-date legal position to be able to make informed, compliant decisions regarding the use of AI in your organisation. Forewarned is forearmed!

Our Legal 500 Top Tier-ranked employment team in Taunton offers bespoke AI training sessions and policies, as well as day-to-day advice on the use of AI in the workplace.

Clarke Willmott is a national law firm with offices in Birmingham, Bristol, Cardiff, London, Manchester, Southampton and Taunton.

Kathryn Walters who is a Legal 500 ranked “Leading Associate”, is a Senior Associate in the employment team at Clarke Willmott in Taunton.