Illinois quietly became one of the most significant states for AI employment law when House Bill 3773 took effect on January 1, 2026.
If you run a business in Illinois with 15 or more employees and use any AI tool to help make employment decisions, this law applies to you. Not just the giant corporations. You.
Here's what changed and what you need to do.
What the Law Does
HB 3773 amends the Illinois Human Rights Act to specifically address AI in employment decisions. It covers decisions about:
- Recruiting and hiring
- Promotions
- Performance reviews
- Disciplinary actions
- Compensation
- Any other terms or conditions of employment
The law has two main requirements:
1. Notification. You must tell employees and job applicants when AI is being used in decisions that affect them. This notification needs to happen before the AI tool is used in their evaluation.
2. Non-discrimination. You cannot use AI systems that produce discriminatory outcomes based on protected characteristics — race, sex, age, disability, national origin, and other protected classes under Illinois law. Importantly, this applies even if the discrimination is unintended. If the tool produces a discriminatory outcome, you're liable.
What Counts as "Using AI" for Employment Decisions
This is where many small business owners are uncertain. The law covers a wide range of tools:
Clearly covered:
- AI resume screening tools (like HireVue, Paradox, or Workday AI features)
- Any software that automatically ranks or filters job applicants
- Predictive analytics tools for employee performance
Likely covered:
- Using ChatGPT or other AI to help write job postings (if those postings systematically exclude certain groups)
- AI scheduling tools that prioritize or deprioritize certain employees
Probably not covered:
- Using AI to draft internal HR documents that a human then reviews
- Using AI to research industry salary benchmarks
- Spell-checking your performance reviews with AI
The rule of thumb: if AI is directly influencing a decision about a specific person's employment, notify them and make sure the tool isn't discriminating.
The Chatbot Disclosure Law for Illinois (Same Legislation)
HB 3021, also in effect, requires businesses to clearly disclose when customers are interacting with an AI chatbot rather than a human. When a customer directly asks if they're talking to a bot, you have to tell them the truth.
This is straightforward: put a disclosure in your chatbot interface. "You're chatting with our AI assistant" is sufficient.
What Illinois Small Business Owners Should Do Right Now
If you use any AI hiring tool: Review the vendor's documentation on anti-discrimination compliance. Ask them specifically: "Does your tool have documented outcomes showing it doesn't discriminate by race, gender, age, or disability?" If they can't answer clearly, that's a red flag.
Draft a notification process: Before you use AI to screen any applicant or evaluate any employee, they need to be notified. A simple statement in your job application ("We use AI tools to assist in our hiring process") combined with a notification at the point of use is sufficient.
Document what you use: Keep a list of every AI tool you use in HR or employment decisions. This becomes your compliance record.
Check your chatbot: If you have a customer-facing chatbot, make sure it discloses that it's AI when asked.
The Illinois Department of Human Rights is developing more specific rules for implementing this law, so stay tuned for more detailed guidance later in 2026.
For now: notify, document, and make sure your AI tools have anti-discrimination compliance documentation. That's the starting point.
Sources: Masuda Funai Legal Update, Spencer Fane Legal Analysis, Illinois General Assembly