Illinois AI Act: What Indiana Employers Need to Know

The Illinois Artificial Intelligence Video Interview Act (820 ILCS 42) is already law and has been in effect since January 1, 2020. It applies to any employer who uses AI to analyze video interviews of applicants for positions based in Illinois.

The law requires employers to: inform the applicant that AI will be used to analyze the video interview, explain how the AI works and what characteristics it evaluates, and obtain the applicant's consent before using AI analysis. Applicants must consent specifically to the AI analysis, not just to the video interview itself.

Employers must also limit sharing of the video to those whose expertise is necessary to evaluate the applicant, and must destroy the video within 30 days of a request from the applicant. The Illinois Department of Commerce and Economic Opportunity enforces the law.

This law applies to Indiana employers who interview candidates for positions located in Illinois, or who interview Illinois residents for remote positions. The key trigger is the location of the position or the applicant, not the employer's headquarters.

The Illinois Artificial Intelligence Act (HB 3773) is broader than the Video Interview Act and regulates AI use across employment, housing, financial services, healthcare, education, and government. Signed into law by Governor Pritzker in August 2024 and effective January 1, 2026, it significantly expands obligations for Indiana businesses operating across state lines.

Key provisions of HB 3773 include: requiring deployers of high-risk AI systems to conduct impact assessments, mandating disclosure when AI is used in consequential decisions, creating a private right of action for individuals harmed by AI systems, establishing bias testing requirements for AI used in employment and lending, and requiring AI developers to provide documentation about how their systems work.

The bill defines high-risk AI as any system that is a substantial factor in decisions about employment, education, housing, healthcare, insurance, lending, or access to government services. This broad definition would capture most business-critical AI applications.

Indiana shares a 260-mile border with Illinois, and the economic ties between the two states are deep. The Chicago metro area extends into northwest Indiana, and hundreds of thousands of workers commute between the states daily.

Indiana employers are affected by Illinois AI laws in several common scenarios: hiring employees who will work in Illinois (even remotely), interviewing candidates who are Illinois residents, serving customers in Illinois with AI-powered tools, and operating offices or facilities in both states.

Indiana companies in the Indianapolis metro area frequently recruit from the broader Midwest talent pool, which includes Illinois. Any company using AI-powered hiring tools to evaluate candidates in this pool may be subject to Illinois law, regardless of where the company is headquartered.

The practical reality is that most mid-size and large Indiana employers have some Illinois exposure. If you hire, sell, or operate across state lines, you should assume Illinois AI requirements apply to at least some of your activities.

Notice: Under both the existing Video Interview Act and the proposed HB 3773, employers must provide clear notice when AI is used. This notice must explain what AI system is being used, what it evaluates, and how its output factors into the decision. Generic disclosures buried in terms of service are not sufficient.

Consent: The Video Interview Act requires affirmative consent from applicants before AI analysis of video interviews. HB 3773 extends consent requirements to other high-risk AI applications. Consent must be specific and informed, meaning applicants must understand what they are consenting to.

Data Retention: The Video Interview Act requires employers to destroy interview videos within 30 days of an applicant's request. HB 3773 creates broader data retention and deletion requirements for AI-processed personal data. Indiana employers should establish clear data retention schedules for all AI-related data.

Bias Testing: HB 3773 requires deployers of high-risk AI to conduct regular bias testing and impact assessments. This includes evaluating whether AI systems produce disparate outcomes based on protected characteristics. Results must be documented and, in some cases, disclosed.

The AI Video Interview Act is enforced by the Illinois Department of Commerce and Economic Opportunity. The original statute did not specify penalty amounts, but violations carry enforcement risk through the department's regulatory authority. The reputational damage and litigation exposure from non-compliance can be significant regardless of specific fine amounts.

HB 3773 (signed into law August 2024, effective January 1, 2026) creates stronger enforcement mechanisms. The law amends the Illinois Human Rights Act, which means individuals harmed by AI systems can file charges with the Human Rights Commission or pursue civil complaints in Illinois Circuit Court. The Illinois Attorney General can also bring enforcement actions, and civil penalties scale with company size and the severity of the violation.

Indiana employers should be particularly aware of the private right of action provisions. Unlike regulatory enforcement (which depends on government resources and priorities), a private right of action means any affected individual can bring a lawsuit. This dramatically increases litigation risk for non-compliant employers.

Step 1: Determine your Illinois exposure. Identify all employees, candidates, customers, and operations that connect your business to Illinois. If you recruit from the Chicago metro area, have remote workers in Illinois, or serve Illinois customers, you have exposure.

Step 2: Audit your AI hiring tools for Video Interview Act compliance. If you use AI-powered video interviews for any positions involving Illinois candidates, ensure you provide the required notice, obtain specific consent, and have data destruction procedures in place.

Step 3: Inventory all AI tools that touch Illinois residents. Go beyond hiring to include customer service AI, marketing AI, lending and insurance AI, and any other tools that process data from Illinois residents.

Step 4: Update your vendor contracts. Ensure your AI tool vendors can demonstrate compliance with Illinois requirements and have committed to providing the documentation, bias testing, and transparency that current and proposed laws require.

Step 5: Train your HR and hiring teams. Make sure everyone involved in hiring understands when Illinois AI laws apply, what disclosures are required, and how to document compliance.

Step 6: Monitor HB 3773 and related bills. While HB 3773 has not yet been enacted, its provisions signal where Illinois regulation is heading. Indiana employers should prepare for these broader requirements now to avoid a compliance scramble later.

Several federal AI bills would create nationwide requirements that overlap with Illinois law. If federal legislation passes, it could preempt some state-level requirements or create a compliance floor that all states must meet.

Indiana employers should monitor both Illinois state legislation and federal proposals, because compliance with one does not guarantee compliance with the other. Federal bills tend to set broader requirements, while state laws like Illinois's add specific procedural obligations.

The most practical approach is to comply with the most stringent applicable requirements, which currently means following Illinois standards for any Illinois-connected activities while preparing for federal requirements that may be more comprehensive.