Navigating the EU AI Act’s First Provisions

(This article originally appeared here, where my subscribers get early access to this before anybody else)

This is A Defining Moment for AI in HR

2nd February 2025 marked a significant shift in how AI is governed in the workplace. With the first provisions of the EU AI Act now in effect, HR and recruitment leaders need to reassess their use of AI-powered tools and ensure compliance with new rules on prohibited AI practices and AI literacy.

For those using AI in recruitment, talent management or employee monitoring, the Act is a wake-up call. The question isn’t whether AI should be part of HR but how it can be used ethically, transparently and legally.

So, what does the EU AI Act mean for your organisation? And more importantly, what do you need to do next?

Key Provisions HR Leaders Must Know

1. AI That Is Now Prohibited in HR

The EU AI Act explicitly bans certain AI uses that pose risks to individuals' rights and freedoms. These include:

• Emotion Recognition in the Workplace AI that attempts to detect employees’ emotions through facial expressions, voice patterns or physiological signals can no longer be used in hiring processes, performance evaluations or monitoring.
• AI-Driven Social Scoring Any system that rates employees or candidates based on behaviour, economic status or personal characteristics is now illegal. This includes tools that assess ‘cultural fit’ using AI-powered psychological profiling.
• Manipulative or Exploitative AI AI that influences behaviour in a way that could harm individuals — such as nudging employees towards excessive work hours — falls under prohibited practices.
• Biometric AI in Hiring Facial recognition or biometric profiling to determine suitability for a role is now off-limits. AI must not use physical attributes to infer skills, personality or employability.

This means HR leaders must audit all AI tools used in recruitment, employee engagement and workplace monitoring to ensure they don’t breach these regulations.

2. AI Literacy: A New Responsibility for HR Teams

Another critical part of the AI Act is Article 4, which introduces AI literacy requirements. Any organisation deploying AI must ensure staff, especially HR professionals, understand:

• How AI systems work
• The risks and ethical implications
• Who is affected by AI-driven decisions

This is particularly relevant for HR teams, as they often select and oversee AI tools used in recruitment, workforce planning and internal management.

Put simply, if AI is influencing hiring decisions or performance assessments, HR teams must be able to explain, challenge and manage these systems effectively. The EU AI Office’s AI Literacy Repository provides examples of how organisations are implementing AI literacy, from structured training programmes to AI governance frameworks.

Without AI literacy, HR leaders risk non-compliance, reputational damage and mistrust from employees and candidates.

What HR and Talent Leaders Need to Do Now

With penalties of up to 7% of annual revenue or €35 million for non-compliance, HR teams need to act fast. Here’s where to start:

1. Conduct an AI Audit in HR

Map out all AI-powered tools used in your HR function. Categorise them based on their risk level:

✅ Low-risk AI: Chatbots answering HR queries or automating admin tasks. ⚠️ High-risk AI: Automated hiring decisions, AI-driven performance evaluations. ❌ Prohibited AI: Emotion recognition, biometric profiling, AI social scoring.

If any tools fall under the banned category, they must be phased out immediately.

2. Implement AI Literacy Training for HR Teams

Your HR team needs more than just a basic understanding of AI. AI literacy should include:

• Training on how AI models work and their decision-making processes.
• Understanding AI bias, fairness and transparency in recruitment and management.
• Knowing how to challenge and validate AI decisions before they impact employees or candidates.

Companies leading the way in AI governance are embedding AI literacy into ongoing training for HR teams, ensuring compliance while maintaining trust with employees.

3. Ensure Transparency in AI Hiring and Performance Management

To comply with the Act, AI-powered HR systems must be explainable and accountable. That means:

• Informing candidates and employees when AI is used in decision-making.
• Providing clear explanations of how AI has influenced hiring or internal processes.
• Ensuring human oversight in AI-driven decisions. AI cannot have the final say on hiring or firing.

Organisations that prioritise AI transparency will build trust while reducing legal risks.

4. Reassess AI-Driven Employee Monitoring

With restrictions on emotion recognition and manipulative AI, any AI-driven workplace surveillance must be reviewed. HR leaders should ensure that:

• AI is not tracking employees’ emotions, stress levels or moods.
• AI-driven productivity monitoring does not infringe on employee rights.
• AI does not replace human judgement in disciplinary actions or performance reviews.

The focus should be on AI augmenting HR decision-making, not replacing it.

AI Compliance as a Competitive Advantage

Beyond compliance, ethical AI adoption is a strategic advantage. Organisations that embed AI transparency and literacy into their HR practices will:

• Attract and retain top talent by ensuring fair and transparent hiring processes.
• Reduce legal and reputational risks by proactively aligning with AI regulations.
• Improve diversity and inclusion by eliminating biased AI-driven decision-making.

Rather than viewing the EU AI Act as a burden, forward-thinking HR leaders can use it as a framework for ethical AI adoption - one that builds trust with employees and candidates alike.

Final Thoughts: HR Must Lead the AI Conversation

The EU AI Act is not just an IT or compliance issue, it is a fundamental HR responsibility. AI is already shaping the future of work, and HR leaders must ensure it is used responsibly.

Action Steps for HR and Talent Leaders: ✅ Audit AI tools for compliance with the Act. 📚 Invest in AI literacy for HR teams. 🔍 Ensure AI transparency in recruitment and performance management. ⚖️ Put safeguards in place for AI-driven employee monitoring.

AI can enhance HR, but only if used ethically, transparently and in compliance with the law.

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