Managing Municipal AI Risks
that can review resumes and cover letters, write performance evaluations, analyze interviews, and several other similar applications. However, using AI in this way risks violating federal and state discrimination laws. There have been a couple of AI discrimination cases already. In 2023, the federal Equal Employment Opportunity Commission (EEOC) settled a discrimination lawsuit against a company called iTutorGroup. The lawsuit had alleged that iTutorGroup used software that automatically rejected female applicants who were over 55 years old and male applicants who were over 60 years old. As part of the settlement, the company agreed to several conditions and paid out $365,000 to 200 applicants. This year, a California federal judge allowed a class action lawsuit to continue against Workday, Inc. Similar to iTutorGroup, the class action suit alleges that Workday violated federal discrimination law by using AI tools that discriminated against applicants based on their age. AI use policies can address these issues by limiting the application of AI tools in human resources contexts. For example, a policy could prohibit the use of AI tools in hiring, evaluating, and disciplining employees altogether. If a municipality wants to use AI for these purposes, the policy should ensure that AI tools are not the final decisionmakers and that the tools’ recommendations comply with federal and state law. This could take the form of regular audit requirements for the AI tools and a comprehensive human review and approval process. Public Records The use of AI tools in municipal contexts creates interesting and unanswered questions about the application of Wisconsin’s public records laws. In Wisconsin, any information that is “created or kept” by an “authority” in connection with its official duties is a public record. Authorities include municipalities, their elected officials, and all their departments, boards, committees, commissions created by any law, ordinance, rule, or order. If something is a public record, the law requires that it be retained by the authority for a certain amount of time and disclosed upon request, unless the law provides otherwise.
As artificial intelligence becomes increasingly accessible and powerful, municipalities across Wisconsin are exploring how these tools might improve their operations. From drafting documents to analyzing data, AI offers compelling benefits for local governments seeking efficiency and cost savings. However, the rush to adopt AI technology brings significant legal risks that municipal officials must carefully consider. Understanding these risks and implementing thoughtful policies can help municipalities harness AI’s benefits while protecting themselves from liability. General Accuracy and Bias AI chatbots are famously imperfect. Take, for example, the case of the Massachusetts lawyer who was sanctioned for submitting a court document that contained several cases that were completely made up by AI. Or the 60-year-old man who was hospitalized after experiencing hallucinations that were later connected to a change in diet recommended by AI. These errors are often called “hallucinations,” and they can be very hard to catch. Even when AI isn’t hallucinating, its information can sometimes be biased and unhelpful. AI tools are designed to be helpful to their users. But sometimes AI can’t give users exactly what they want and, instead of telling them that, the AI will provide the answer they think the user wants instead of the one that is correct. This is called “compliance bias.” Compliance bias can be an even bigger problem than hallucinations because of how much harder the issues are to catch. However, the consequences can be just as severe. AI use policies can reduce these risks by requiring user review and accountability. Users of AI must be responsible for checking the accuracy of generated content and ensuring that it is free of bias. Policies or training could teach staff and officers about the risks of AI use and give people the tools they need to spot and fix the problems. For example, users could be instructed how to write better prompts by specifically instructing AI chatbots to avoid hallucinations and compliance
bias among other strategies. Employment Situations
Using AI in employment or human resources contexts can and has landed organizations in legal hot water. There are AI tools
The Municipality - October 2025 | 20
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