Spotting the red flags: The legal risks posed by employer use of AI

Artificial intelligence—or AI as we all refer to it—is rapidly transforming and becoming increasingly integrated into employer’s decision-making. Employers are leveraging AI tools to streamline hiring, manage employee performance, draft contracts, policies, or other legal documents, and even to answer complex legal questions. But as the adoption of AI tools accelerates, so do the risks. For employers in particular, which have to grapple with human emotion and employee responses to decision-making, the use of AI can raise serious concerns.

We have seen a growing number of employers rely on and adopt AI tools, and we want to ensure that employers are aware of the potential legal risks associated with AI use and AI decision-making. This article focuses on three “red flags” with AI usage: (1) the danger of inaccurate or misleading legal outputs; (2) how AI may threaten attorney-client privilege or the work product doctrine; and (3) the growing wave of litigation targeting AI platforms.

Red Flag #1: Inaccurate and hallucinated legal advice

Employers are increasingly turning to AI tools for real-time guidance on employment issues (terminations, accommodations, workplace policies, leave requests, etc.). However, AI-generated responses are not a substitute for legal advice—AI tools are not lawyers. While AI may be able to generate a persuasive, well-structured response, it’s also prone to producing incorrect or entirely fabricated information (commonly referred to as “hallucinations”).