AI in the workplace – what employers need to know

AI is reshaping the way we recruit, manage and support staff. From chatbots and virtual assistants to decision-making algorithms and GenAI tools like ChatGPT, AI is becoming a staple across HR and operations. But as employers explore the benefits, legal and ethical risks are coming into sharper focus.

What is AI in the workplace?

AI refers to software or machines that simulate human intelligence to complete tasks – often by recognising patterns, learning from data and improving over time. Generative AI (GenAI), such as large language models, goes a step further by creating content based on the data it has been trained on.

Applications include:

• Recruitment and selection – generating job descriptions, screening CVs, ranking applicants and even conducting initial interviews.
• Workforce planning – allocating shifts, managing rotas and forecasting future staffing needs.
• Performance monitoring – tracking productivity, assessing outputs and identifying underperformance.
• Employee retention – predicting turnover risk and recommending interventions to retain staff.
• Redundancy selection – using data-driven tools to assess roles or individuals for redundancy (with significant legal risk if not handled fairly).
• Training and development – suggesting personalised learning and progression pathways based on employee data.

Key risks employers need to manage

AI can improve efficiency but overreliance, lack of transparency or poor implementation can lead to legal claims. Here are the most pressing risks:

1. Unfair dismissal and performance management
   AI can help identify trends in performance data – but relying on it too heavily risks unfair or inaccurate outcomes. If a manager doesn’t understand how the AI reached its conclusion, they may base decisions on flawed assumptions, increasing the risk of unfair dismissal claims.
2. Discrimination and bias
   AI tools are only as fair as the data they’re trained on. If historical data contains bias – for example, fewer promotions for women or under-representation of certain ethnic groups – AI may replicate or reinforce those patterns.
3. Data protection and transparency
   AI typically involves processing personal data, including sensitive categories like health, ethnicity or beliefs. Employers must comply with UK GDPR rules – especially where profiling or automated decision-making has a significant impact.
4. Monitoring and privacy
   Using AI to monitor productivity, keystrokes or video footage can raise serious privacy concerns. Under Article 8 of the European Convention on Human Rights, employees have a right to respect for their private life – even in the workplace.
5. Whistleblowing and accountability
   Employees may raise concerns about how AI is being used – particularly if decisions appear unfair, unsafe or discriminatory. These concerns can amount to protected disclosures under whistleblowing law.
6. Liability to clients and customers
   AI systems can generate incorrect or even nonsensical information, also known as ‘hallucinations’. This can lead to errors in decision-making, financial losses, and reputational damage. This can be particularly problematic in professional regulated sectors, such as financial and legal services, where the importance of accurate up to date information is paramount. In the absence of active human oversight, unchecked overreliance on AI can give rise to negligent outcomes.

Practical steps for employers

Whether you’re considering AI for recruitment, performance management or workplace automation, here are some safeguards to implement now:

• Review and update policies – Cover AI use in contracts, privacy notices and onboarding processes.
• Conduct risk assessments – Identify bias, fairness and accountability risks for each tool.
• Ensure human oversight – Especially for decisions with legal, regulatory or career impact.
• Train HR and managers – Build understanding of how AI works, where it fails and how to challenge outputs.
• Monitor health impacts – AI-driven surveillance has been linked to increased stress and anxiety.

What’s next?

While the UK has yet to introduce specific legislation, regulation is coming. The Government confirmed in the July 2024 King’s Speech that it will strengthen AI rules.

How we help

At Thomas Mansfield Solicitors, we help employers use AI lawfully and responsibly. We review policies, assess legal risks, advise on GDPR and employment law compliance, and support with disciplinary or dismissal processes involving the use and misuse of AI. We also train HR and managers to use GenAI tools with confidence and the right safeguards.

Using or planning to introduce AI in your workplace? Whether you’re adopting new tools or facing an issue, our employment law experts can help with clear, practical advice.