The take up of artificial intelligence and people analytics tools has accelerated across Europe in the past two years. With covid-19 forcing workers to toil from home rather than the office, more and more employers have controversially purchased various forms of employee surveillance and monitoring software to maintain staff productivity, as well as to assess potential new hires. Such practices, while normal in the United States, have until the pandemic been alien to most European organisations.

Although he is surprised it has taken this long for European employers to follow the lead of their American counterparts and parent companies, Boris Dzida, global leader of Freshfield Bruckhaus Deringer’s people and reward practice, advises his clients not to rush the implementation of such potentially risky projects and stressed the importance of having internal and external legal advice from the very beginning.

“IT people are very enthusiastic about AI, but HR people, with internal or external legal advisors, only provide input at a relatively late stage in these projects. By which point a lot of work has already been done, probably in the wrong direction,” he says. “Important issues such as data protection or information and consultation obligations have not been put into the timeline. There are situations where the data protection lawyers say, ‘Interesting product, but it doesn’t work in Europe,’ or ‘Interesting timeline, but have you considered that we need to negotiate that with the works council?’ Then the whole global project gets problematic.”

To illustrate his point, Dzida references the time-tracking software of US-based Hubstaff. The software takes screenshots up to three times every ten minutes, as well as logging keystrokes, mouse movements, and websites visited, to assess remote workers’ productivity. “Rolling out such a product in Europe probably won’t work, or at least in some jurisdictions where the complete surveillance of employees would breach data protection and employment laws. But this is a typical situation where the expectation of a US company is that they use something in the US so they roll it out in Europe, only for it not to work for legal reasons,” says Dzida.

Consultation with workers, and their representatives, should not be overlooked either. “German works councils have a say in every IT tool introduced by an employer that is able to monitor employees. Almost every AI or people analytics tool can be used, to some extent, to monitor employees. But if you don’t have their consent, the works council can stop you with an interim injunction at the labour court. When you’re in the middle of the project that needs to be rolled out globally and the Germans come and stop the project – that’s a nasty surprise and one I would like to avoid when advising clients.”

Even if the implementation of these new tools is done carefully and diligently, there are still long-term risks for employers. Unions and labour activists have repeatedly warned that automated decision-making, from hiring to firing, leads to discrimination of minority workers. And they have evidence to back up such claims. In recent years, tech giants Amazon and IBM were forced to scrap tools that showed a bias against women and ethnic minorities. Similar claims have been made against a facial recognition system used by ride-hailing giant Uber, while video interview and assessment vendor HireVue dropped facial expression monitoring from its hiring algorithm.

“Discrimination is a very good example because again, it depends on the country, how risky it is and an employer needs to be aware of that,” says Dzida. “What can employers do to mitigate the risk? Well, you can’t check the algorithm because the vendor will not tell you how the algorithm works. That’s a secret and, as an employer, you don’t have the technical knowledge anyway. What employers can do is regularly check whether AI decision-making leads to discriminating results. If you take a sample of 100 candidates – 50 male, 50 female – you may think the results will show an equal number of men and women, recommended by the tool, get the job. But if the sample data shows it’s only men, then there is something wrong with the algorithm.”

Acknowledging that the pandemic has been an accelerator of change – especially concerning remote working, which Dzida says “will never disappear” – Dzida believes tools that help employers with the selection of candidates, and the way performance is evaluated, will soon become the norm in Europe. How far such tools will intrude on workers’ lives is, however, debatable. “They will help with figuring out who can fill a role from internal talent pools,” he says. “When it goes further in a way that, for example, helps analyse how employees feel by analysing their emails, I don’t know. Probably in the future, but considering how slowly it has taken to get here, I don’t expect that to be the norm anytime soon.”

The European Commission’s draft regulations on the use of AI within the bloc clearly illustrates automated decision-making is on lawmakers’ agendas. While it is perhaps too soon to predict the final version of the new AI directive, the sensitive issue of worker surveillance means that the regulators of data protection are a more immediate danger for Europe’s employers. “The two highest fines that the German Data Protection authorities have imposed related to privacy breaches in the workplace,” explains Dzida. “The next big data protection privacy issue we will see on a global level may relate to employee data because it is sensitive and it’s high on the radar for legislators and data protection authorities.”

Tech thrills

Dzida, who is based in Hamburg, joined legacy firm Bruckhaus Westrick Heller Löber in 1998 intending to become an M&A lawyer. However, the firm had other ideas. “They said, ‘We’ve had a termination from someone in the employment law team. What about you trying for that job?’ And I said, ‘Well, it’s not really what I want to do, but let’s give it a try.’ And after three weeks, I didn’t want to do anything else.”

More than two decades later, Dzida now oversees the firm’s global people and reward practice. Consisting of around 100 lawyers worldwide, most team members are based in London or Europe, although the team is growing in the US where, last month, the firm announced the poaching of new partner Nicole Foster from Cravath, Swaine & Moore in New York. All told, Freshfields now has ten compensation and benefits lawyers in New York and Silicon Valley.

Back in Hamburg, Dzida maintains a broad advisory and litigation practice but is perhaps best known for advising employers on complex restructurings and integrating employees after M&A transactions, particularly concerning data protection and privacy laws, and how these may affect plans to transfer employee information across borders. His passion for M&A is particularly strong when working for clients in the technology sector where people are a company’s core – and sometimes only – asset involved in the transaction. “That’s different from M&A transactions in other sectors where, of course, people may be very important, but so is the factory you’re buying. In tech, it’s almost always the people and that puts employment law as one of the most important issues in the transaction.”

Such deals are particularly challenging in Germany, where employees involved in a transfer of undertakings have the right to object and remain with their former employer. “If employees are the core asset, you as a purchaser, cannot be sure you will actually get the core assets. That influences the whole structure of the deal and then the employment analysis influences the HR strategy. That’s what I like about this job.”

Returning to the subject of remote working, it has often been reported that the tech sector was quicker to adopt out-of-office working than other industries. However, Dzida explains that tech businesses were not immune from the remote-working challenges experienced by other companies. “Some of our tech clients had large numbers of employees who should have been working in France or Germany, for example, but instead decided to remote work from the UK or US where they had family. This caused employment and tax law issues we did not have before the pandemic.”

On the subject of technology, Freshfields, like many other elite firms around the globe, has placed legal tech high on its business agenda. “Last year, we entered a legal hackathon to collect ideas on what kind of tools could be useful for our practice group,” explains Dzida. “The winner was a tool that analyses people analytics tools to determine whether they contain biased algorithms and are discriminatory. We are in the process of developing this and, hopefully, we will see the results soon.”

Also of note, Dzida recently hired a new employment associate Sebastian Schriml who wrote his doctoral thesis on legal tech and has even learnt how to code. With technology taking over more and more of our everyday lives, does Dzida believe that new associates should understand the fundamentals of coding? “Probably not, but having openness and enthusiasm for dealing with such technical things is definitely something lawyers of the next generation will find useful to have. Many in the next generation are enthusiastic about that, and that's a good thing.”

Ethnic diversity within the profession is another topic Dzida is keen to talk about. Data from 2020 shows 6% of the magic circle firm’s UK partnership, 24% of its associates, and 39% of trainees came from black, Asian, or minority ethnic backgrounds. Last year Freshfields launched new five-year global commitments to diversity and inclusion and targets, including plans to double the number of black associates at the firm by 2026. The firm has also joined with Allen & Overy, Clifford Chance, Linklaters, Slaughter and May, Herbert Smith Freehills, Macfarlanes, and Norton Rose Fulbright to launch Legal CORE – collaboration on race and ethnicity –  to discuss ways to address diversity issues within the legal sector. 

“Whether in the US or London, the legal profession is not good in terms of ethnic diversity, but over many years there has been more progress made there compared to the whole of continental Europe, where it has not been on the agenda,” explains Dzida. “We’ve had the Stephen Lawrence Scholarship Scheme in London for many, many years. And it’s a huge success. We are just starting something similar in Germany and in other continental European jurisdictions. We have more lawyers, in the legal profession as a whole, with an ethnically diverse background. Bringing them into the magic circle is the next thing we need to achieve.”

Importantly, Dzida highlights that global employers cannot have a one-size-fits-all approach to ethnic diversity. “The question of what is ethnic diversity is different in each country. In the Netherlands, a D&I policy will probably focus on people who immigrated from Northern Africa; in France, from Morocco. That is different compared to Germany, where we have a very big population with Turkish heritage. But still, you don’t see many people with a Turkish background in the legal profession. We need to ask why that is? Is it because there is a lack of role models? That law firms did not specifically target those people at university? There are many, many reasons and they are quite different across different countries. But the common theme is that we need to address this now, in all of continental Europe.”

Finally, Dzida highlights the growing importance of environmental, social, and governance (ESG) policies to companies’ long-term success. In particular, Dzida sees employers’ climate change policies as a “megatrend” businesses must prepare for. “ESG targets is now a standard element in directors’ remuneration, but I think that will become more important for remuneration at senior executive, and even at normal employee level. Also, pension funds investing in ESG-compliant investments is another example where climate change will impact the work we do. I would not be surprised if that became a bigger topic in the mid-term future.”