INTRODUCTION
Artificial intelligence (AI) is redefining workplace structures, management systems, and employment relationships across the globe. From recruitment algorithms to AI-powered performance monitoring, its integration into employment practices raises significant legal questions. These issues intersect with anti-discrimination laws, privacy rights, data protection statutes, occupational safety, and the classification of workers. While AI offers unparalleled efficiency and predictive capacity, it also exposes gaps in existing employment law frameworks.
Recruitment and Hiring Bias
AI-driven recruitment tools are marketed as impartial, but the risk of algorithmic bias is now well-documented. If AI is trained on historical datasets that reflect discriminatory hiring patterns, it can perpetuate exclusionary outcomes. The principle against discriminatory hiring is firmly rooted in Indian constitutional law under Articles 14, 15, and 16, as well as in statutory instruments such as the Equal Remuneration Act, 1976.
In Air India v. Nergesh Meerza (1981) 4 SCC 335, the Supreme Court held that employment policies that are arbitrary or discriminatory violate Article 14. While the case dealt with human decision-making, its principles are applicable to AI-based systems: any hiring process, whether manual or automated, that results in discriminatory exclusion would offend equality provisions.
Internationally, the case of Loomis v. Wisconsin (2016) in the US, though criminal in nature, is instructive—it involved a proprietary risk assessment algorithm whose opaque methodology raised concerns about fairness and accountability. A similar issue arises in employment: opaque AI decision-making (the “black box” problem) can make it difficult for candidates to challenge discriminatory outcomes.
AI Surveillance and Privacy Concerns
AI-driven employee monitoring can track keystrokes, online activity, biometric data, and behavioural patterns. While employers justify such systems for efficiency and security, they risk infringing on privacy rights. In Justice K.S. Puttaswamy (Retd.) v. Union of India (2017) 10 SCC 1, the Supreme Court recognised privacy as a fundamental right under Article 21, including informational privacy.
Although Puttaswamy dealt with state action, its reasoning applies to private employment when surveillance becomes disproportionate. The Madras High Court in S. Vijaya Kumar v. Union of India (2014) also underscored the importance of proportionality in data collection. Employers must therefore balance monitoring with the least intrusive means necessary, failing which they may invite legal scrutiny.
Redefining the Employer–Employee Relationship
AI challenges traditional tests for determining employment status. In Indian labour jurisprudence, the “control and supervision” test from Dharangadhara Chemical Works Ltd. v. State of Saurashtra AIR 1957 SC 264 remains influential. However, when algorithms assign work, evaluate performance, and even decide disciplinary action, determining who exercises “control” becomes complex.
In the gig economy, this complexity is evident. While not yet settled in India, foreign cases such as Uber BV v. Aslam [2021] UKSC 5 held that gig workers managed through algorithmic platforms were “workers” entitled to minimum wage and other protections. A similar recognition in India could extend statutory benefits under the Industrial Disputes Act, 1947 and the Social Security Code, 2020 to platform-based workers.
Algorithmic Discrimination
Employment law prohibits not only direct but also indirect discrimination. In State of Kerala v. N.M. Thomas (1976) 2 SCC 310, the Supreme Court recognised that equality provisions must address systemic and structural discrimination. AI systems, even without intent, can produce patterns of exclusion if they rely on biased training data.
The challenge lies in proving such discrimination when no human decision-maker is directly involved. This gap suggests a need for statutory amendments focusing on “discriminatory impact” in automated systems, akin to the EU’s draft Artificial Intelligence Act, which mandates transparency and impact assessments.
Data Protection and Consent
AI thrives on vast datasets, including sensitive employee data. The Digital Personal Data Protection Act, 2023 (DPDPA) sets out principles of consent, purpose limitation, and data minimisation. However, in employment, consent is often illusory—workers may feel compelled to agree to data collection as a condition of employment.
The Supreme Court in Selvi v. State of Karnataka (2010) 7 SCC 263, although dealing with narco-analysis, stressed the importance of informed consent and the protection of mental privacy. Applying this reasoning, consent for AI data processing must be truly informed, specific, and revocable. Using payroll data for training AI performance tools without fresh consent could violate the DPDPA and attract penalties.
Workplace Safety and AI Risks
In industries where AI interacts directly with human labour—manufacturing, logistics, healthcare—new risks emerge. The Occupational Safety, Health and Working Conditions Code, 2020 mandates employers to provide a safe working environment, a duty that logically extends to AI-driven processes.
In Consumer Education and Research Centre v. Union of India (1995) 3 SCC 42, the Supreme Court held that the right to a safe workplace is part of the right to life under Article 21. If an AI-controlled system malfunctions, causing injury, employers may be liable under both statutory safety provisions and constitutional principles.
Job Displacement and the Social Impact of Automation
AI’s capacity to automate repetitive tasks raises concerns of large-scale job displacement. While Indian law does not yet provide for “automation-related retrenchment” as a separate category, Section 25F of the Industrial Disputes Act, 1947 requires notice and compensation for retrenchment, which could apply if automation results in termination.
The case of Management of Karnataka State Road Transport Corporation v. M. Boraiah (1983) 3 SCC 230 reinforces that retrenchment provisions apply broadly where employment is ended for any reason other than disciplinary action. A purposive interpretation could extend protection to workers displaced by AI, alongside policy measures for retraining and redeployment.
Some jurisdictions are considering “robot taxes” or employer contributions to social security funds when replacing human workers with AI. While not yet debated in Indian courts, such mechanisms could align with the Directive Principles of State Policy under Articles 38 and 39, which mandate a social order based on justice and adequate livelihood.
Towards Ethical and Proactive Regulation
Employment law is traditionally reactive, evolving through litigation and amendments. AI’s pace demands a proactive approach. The Vishaka v. State of Rajasthan (1997) 6 SCC 241 precedent, where the Supreme Court laid down binding guidelines in the absence of legislation, suggests that courts could similarly issue interim principles for AI fairness, transparency, and accountability until Parliament enacts comprehensive AI-employment legislation.
International experience, such as the EU’s proposed AI Act, offers models for risk classification, audit obligations, and penalties for non-compliance. Adopting a similar approach in India could integrate AI ethics directly into employment regulation, ensuring technology complements rather than undermines labour rights.
Conclusion
Artificial intelligence has the potential to revolutionise workplaces, but without careful legal oversight, it can also erode fundamental employment protections. Indian jurisprudence already contains principles—equality, privacy, informed consent, safe working conditions—that can be applied to AI contexts. However, the novelty and opacity of AI systems require statutory clarity, regulatory capacity, and judicial creativity. The challenge is not merely to regulate AI as a technology but to embed it within a framework that upholds dignity, fairness, and social justice in employment. As with past labour law reforms, the path forward will depend on balancing innovation with the constitutional promise of equality and protection for all workers.
CONTRIBUTED BY : LAKSHAY NANDWANI (INTERN)