Yesterday, Illinois became the second state in the U.S. to require employers to disclose when they use artificial intelligence in hiring decisions. House Bill 3773, signed into law last August, took effect January 1, 2026. If your business hires employees or contractors in Illinois?even one person?this law applies to you.
The rule is straightforward: if you use AI to screen resumes, score candidates, analyze video interviews, or make hiring recommendations, you must tell applicants. You must also tell them what data the AI uses and give them a way to request a human review. No disclosures mean potential penalties starting at $2,500 per violation for first offenses, escalating to $5,000 for repeat violations.
What Counts as AI Under This Law
Illinois defines "artificial intelligence" broadly: any machine-based system that makes predictions, recommendations, or decisions influencing real-world environments. That includes resume parsing tools, applicant tracking systems with scoring algorithms, video interview analyzers that assess facial expressions or speech patterns and chatbots that pre-screen candidates.
It does not include basic keyword searches or simple filtering tools that require human decision-making at each step. The key distinction is automation. If the system makes or influences decisions without direct human input on every candidate, it likely qualifies as AI under HB 3773.
This is intentionally broader than New York City's AI hiring law, which took effect in 2023. New York focused narrowly on "automated employment decision tools" that substantially assist or replace discretionary decision-making. Illinois covers any AI system that participates in the hiring process, even if a human makes the final call.
Who This Law Applies To
Any employer hiring in Illinois. That includes out-of-state companies recruiting Illinois residents, staffing agencies placing workers in Illinois and gig platforms operating in the state. The law does not have a minimum employee threshold. If you hire one person in Illinois and use AI in that hiring process, you must comply.
The timing matters. The law applies to job postings published or updated on or after January 1, 2026. Existing postings from 2025 are not retroactively covered, but if you refresh or repost them in 2026, the disclosure requirement applies.
Contractors and freelancers are included. If you use AI to evaluate independent contractors, the disclosure requirements apply just as they would for full-time employees. The law treats any hiring decision?employee, contractor, temporary worker?the same way.
What You Must Disclose
Illinois law requires three specific disclosures and they must be made before AI is used to evaluate a candidate:
1. That you are using AI. The disclosure must be clear and conspicuous. Burying it in a 20-page applicant agreement does not count. The Illinois Department of Labor has not issued specific formatting guidance yet, but best practice is to include a separate section in job postings and application acknowledgments titled "Use of AI in Hiring."
2. What data the AI analyzes. If your video interview tool scores tone of voice, facial expressions and word choice, you must say that. If your resume screener looks at education, work history and skills keywords, disclose it. Applicants need to understand what information is being evaluated and how.
3. How to request human review. Candidates must have a clear process to ask for a human to review the AI's assessment. This does not mean every rejected candidate gets a personal phone call. It means you provide a contact method?email, web form, phone number?where candidates can request review and you respond within a reasonable time frame.
The law does not require you to explain the AI's specific algorithms or proprietary decision logic. You are not obligated to reveal trade secrets. But you cannot hide the fact that AI is being used or what it evaluates.
Penalties and Enforcement
The Illinois Department of Labor enforces HB 3773. Violations are considered a business offense under the Illinois Human Rights Act. First-time violations carry penalties of at least $2,500 per affected applicant. Repeat violations escalate to $5,000 per applicant and can trigger investigations into broader hiring practices.
The law allows individuals to file complaints with the Illinois Department of Human Rights. If the department finds a pattern of violations, it can pursue broader enforcement actions, including audits of hiring practices and mandatory compliance training.
Unlike some regulatory frameworks that start with warnings and grace periods, Illinois made enforcement available immediately. There is no phase-in period. If you posted a job on January 1 using AI without disclosure, you are already in violation.
The Conflict with Federal Policy
Here is where it gets complicated. On December 26, 2025, President Trump signed an executive order titled "Removing Barriers to American Leadership in Artificial Intelligence." Section 3 directs federal agencies to rescind or revise AI regulations deemed "barriers to AI innovation."
The executive order specifically mentions state and local laws requiring disclosure of AI use. Trump's administration argues these laws create compliance burdens that slow innovation. The order does not directly nullify state laws?presidents cannot overrule state legislation?but it signals that federal agencies may challenge or preempt state AI regulations.
This creates legal uncertainty. Employers operating in Illinois face a choice: comply with state law and risk federal pushback, or ignore state law and face state penalties. Most legal experts advise compliance with the state law until a court explicitly overturns it, but this tension is unresolved.
Illinois Attorney General Kwame Raoul has indicated the state will defend HB 3773 if challenged. Expect litigation in 2026. Until a court rules, the state law remains enforceable.
What Compliance Actually Looks Like
Practical compliance is simpler than the legal complexity suggests. Here is a minimum viable disclosure framework:
In job postings: Add a section titled "Use of AI in Hiring" that states: "This employer uses artificial intelligence to assist in evaluating job applications. AI tools may analyze [resume content/video interview responses/skills assessments]. Applicants may request human review of AI assessments by contacting [email/phone number]."
In application systems: Include a checkbox acknowledgment before submission: "I acknowledge that this employer uses AI to assist in hiring decisions and that I may request human review of AI-generated assessments."
In follow-up communications: If an AI tool rejects a candidate, include the disclosure again in the rejection email with the contact method for requesting human review.
The disclosure does not need to be lengthy. It needs to be visible, clear and actionable. If a reasonably attentive applicant would notice it and understand what it means, you likely meet the standard.
The Broader Trend
Illinois is not alone. New York City's AI hiring law has been in effect since 2023, requiring bias audits for automated employment decision tools. Colorado passed Senate Bill 24-205 in May 2024, requiring AI impact assessments for high-risk systems, including hiring tools, effective February 1, 2026.
California is considering similar legislation. The European Union's AI Act, which began phased enforcement in 2024, classifies hiring AI as "high-risk" and imposes transparency, documentation and human oversight requirements. The trend is toward more regulation, not less, regardless of federal resistance.
If you operate in multiple states, the safest approach is to adopt the strictest standard across all jurisdictions. Disclosing AI use in Illinois costs you nothing in states without such laws, but failing to disclose in Illinois exposes you to penalties. Standardizing on disclosure simplifies compliance and reduces risk.
What Happens Next
Illinois employers have three immediate options. First, comply with HB 3773 by adding disclosures to hiring processes. Second, stop using AI in hiring for Illinois positions until legal clarity emerges. Third, continue using AI without disclosure and accept the legal risk.
Option one is the lowest-risk path. Disclosure is inexpensive and straightforward. Option two eliminates legal risk but sacrifices any efficiency gains from AI tools. Option three gambles that federal preemption will invalidate the state law before enforcement actions accumulate?a risky bet given Illinois's stated intent to defend the law.
For candidates, this law provides a new tool. If you apply for a job in Illinois and suspect AI screened you out unfairly, you now have a legal right to request human review. Use it. The law works only if applicants exercise it.
For the rest of 2026, watch for court challenges, federal agency actions and additional state laws. Illinois may be the second state to regulate AI hiring, but it will not be the last. The question is not whether transparency in AI hiring becomes standard?it is how fast.
The Bottom Line
Illinois HB 3773 is now law. If you hire in Illinois and use AI, disclose it. Tell applicants what data the AI uses. Provide a way to request human review. The legal uncertainty around federal preemption does not excuse non-compliance with state law unless a court explicitly overturns it.
This is not about whether AI in hiring is good or bad. This is about transparency. Applicants have a right to know when machines are making decisions about their careers. Illinois decided that right is worth enforcing. Comply now, or risk penalties later.
