Why Ontario’s AI hiring disclosure puts trust to the test

Since New Year's Day, many companies in Ontario must disclose whether publicly advertised job postings use Artificial Intelligence within the hiring process.

While not all companies are included in this amendment to the province's Employment Standards Act, employers with 25 or more employees must comply. 

The move, initially announced in November 2023, was accompanied by a slew of other announcements, including the disclosure of salaries in job postings within a $50,000 range.

Tanjim Hossain, Chair and Professor of Marketing in the Department of Management at the University of Toronto Mississauga, says it places new emphasis on transparency, trust and how employers explain their hiring processes to candidates.

AI is already deeply embedded in recruitment, mainly driven by efficiency and cost pressures. Automated screening tools allow employers to process large application volumes quickly, a capability that has become difficult to replace in competitive labour markets.

A report by Express Employment Professionals found that 54 per cent of Canadian hiring managers say their organisations are using AI.

Although Ontario's regulation does not require employers to explain how their AI tools function, organisations may choose to go further. Providing basic context, such as whether AI is used only for resume sorting or whether final decisions remain human-led, could help reduce uncertainty and strengthen applicant confidence, says Hossain.

Disclosure without explanation can leave applicants filling in the gaps themselves, often based on incomplete or inaccurate assumptions about how AI systems work.

"Transparent information is actually good for applicants as long as its not confusing. [For example] many businesses or credit cards are dumping a lot of information that can actually be processed," he said. "What is better is to actually release some information, because if you just say we use AI, then the applicants know AI was used but 'how' is left to their imagination, and then it's whatever their perception is, they will go with that."

Research across consumer markets has consistently shown that transparency can improve trust when information is clear and accessible. According to the Canadian Marketing Association, in a data privacy research report of 1,531 Canadian consumers, 59 per cent of respondents say they are more comfortable sharing their information if they know how and why their data is being used.

Job applicants provide sensitive personal information and are increasingly aware of concerns surrounding algorithmic bias, data privacy and automated decision-making. Simply stating that AI is used may raise questions without providing reassurance, Hossain added.

From a recruitment strategy standpoint, he says the regulation effectively turns transparency into a communication test. Employers that fail to clearly explain their practices risk damaging candidate trust, while those that communicate well may gain an advantage.

As Ontario's rule takes hold, the focus of hiring debates may shift away from whether AI should be used at all and toward how it is deployed transparently and responsibly.

"Even though the firms are not required to provide detail, if we can provide like a disclaimer to detail how its used and how the data would be used, and how the AI chatbot would make decision...would be actually good and effective."