AI Hiring Laws in Indiana: What Employers Need to Know

AI-powered hiring tools have become one of the most scrutinized areas of AI regulation. Employers across Indiana are using automated resume screening, AI-scored video interviews, predictive analytics for candidate selection, and chatbot-driven initial assessments. Each of these tools is the subject of proposed legislation at both the federal and state level.

At the federal level, multiple bills would require employers to disclose AI use in hiring, provide explanations to rejected candidates, and conduct bias audits. At the state level, the Indiana General Assembly has introduced bills mirroring these requirements with Indiana-specific enforcement. Illinois has already enacted the AI Video Interview Act, which directly affects Indiana employers who hire across state lines.

The common thread across all proposed legislation is transparency: candidates have a right to know when AI is evaluating them, and employers have an obligation to ensure these tools do not discriminate.

Automated resume screening is one of the most widely used AI hiring tools. Software that scans resumes for keywords, scores candidates based on qualifications, or ranks applicants using machine learning is used by employers of all sizes across Indiana.

Proposed legislation would require employers to disclose when automated screening is used, provide rejected candidates with notice that AI was involved in the decision, and in some cases offer a human review option. Several bills also require that screening algorithms be audited for disparate impact based on race, gender, age, disability, and other protected characteristics.

Indiana employers using automated screening should document which tools they use, how those tools make decisions, and what data they process. This documentation will be required under most proposed bills and is a best practice regardless of legislation.

AI-powered video interviews that analyze facial expressions, voice patterns, word choice, or body language are subject to some of the strictest proposed requirements. Several federal bills would require explicit candidate consent before AI analysis of video interviews, and Illinois has already banned AI video interview analysis without consent.

Beyond video interviews, AI-driven skills assessments, personality tests, and cognitive ability evaluations are also targeted. Proposed requirements include providing candidates with information about what the AI measures, how it scores responses, and what weight the AI assessment carries in the overall hiring decision.

Indiana employers using any form of AI-assisted assessment should review their vendor contracts to confirm the tools comply with proposed requirements. Vendors should be able to demonstrate bias testing results and explain how their algorithms work.

AI is not just used in hiring. Indiana employers increasingly use AI to monitor employee productivity, analyze communications, track location, and flag performance issues. Several proposed bills extend AI transparency requirements to the entire employment relationship, not just the hiring process.

Key proposals include requiring employers to disclose all AI monitoring tools in use, limiting the types of data that can be collected, and giving employees the right to access data collected about them. Some bills also restrict the use of AI in termination and disciplinary decisions, requiring human review before adverse employment actions based on AI analysis.

Indiana employers should inventory all AI tools used across the employee lifecycle, from recruiting to onboarding to ongoing management to separation. This inventory is the starting point for compliance with any workplace AI legislation.

Multiple proposed bills require employers to conduct bias audits of AI hiring tools. These audits evaluate whether AI systems produce disparate outcomes based on protected characteristics such as race, gender, age, and disability status.

Audit requirements vary by bill, but common elements include: annual third-party audits of automated employment decision tools, publication of audit results (in some proposals), and corrective action plans when disparate impact is identified. New York City's Local Law 144 serves as a model that several federal and state bills follow.

Indiana employers should ask their AI hiring tool vendors whether independent bias audits have been conducted, request copies of audit results, and include bias audit requirements in vendor contracts going forward.

Step 1: Inventory all AI tools used in your hiring process. Include resume screening software, chatbots, assessment platforms, video interview analysis, background check AI, and any other automated tools that influence hiring decisions.

Step 2: For each tool, document what data it collects, how it makes decisions, and what role its output plays in your hiring process. Determine whether the tool makes autonomous decisions or provides recommendations that humans review.

Step 3: Review vendor contracts for each AI hiring tool. Check for bias audit commitments, data usage rights, indemnification clauses, and compliance representations. Update contracts to include required protections.

Step 4: Assess your current candidate notification practices. Do you tell candidates when AI is used? Do you provide explanations for AI-driven rejections? Do you offer a human review option? Most proposed bills require all three.

Step 5: Request bias audit results from your vendors. If audits have not been conducted, determine whether your organization or your vendor will be responsible for conducting them under proposed legislation.

Step 6: Establish a monitoring process. Assign someone to track AI hiring legislation at both the federal and state level. Subscribe to our weekly newsletter for plain-English updates on bills that affect Indiana employers.