28 May, Los Angeles – Enterprises will face an influx of AI lawsuits by 2027, warns John Margerison, CEO of XFactorAi, an AI communications platform for Fortune 500 companies. He argues deployers of AI tools are often ignorant of the legal risks they expose themselves to when signing vendor contracts.
Margerison’s intervention follows the landmark case, Mobley v. Workday, which he argues is a prime example of AI deployers being saddled with what they think is the vendor’s responsibility. The age discrimination case was brought against Workday’s AI hiring algorithm, but dozens of companies that used it were also pulled in as co-defendants. The court was prepared to treat Workday as an ‘agent’ of the companies, seeing the hiring tool as part of the same legal entity.
For Margerison, this case sets a precedent and, coupled with the increasing pace of regulatory development, means we’ll see countless more cases like this next year. AI mentions in global legislative proceedings have grown ninefold since 2016, rising 21.3% in 2024 alone, with 145 AI laws enacted in the US last year. Gaps in AI governance are growing fast, and enterprises are failing to keep up.
That’s compounded by the fact that only 3% of compliance professionals say their organization is prepared for AI regulation as things stand. Margerison argues this lack of preparedness means we’ll soon see a spike in the number of breaches.
To avoid legal proceedings, he urges enterprises to name a single accountable owner for AI governance and audit every existing tool, asking questions they failed to address when signing vendor contracts. He argues these changes must be treated as business-critical, or warns businesses could face an influx of lawsuits as early as 2027.
John Margerison, CEO of XFactorAi, said: “There’s a common misconception that, should AI agents cross legal lines, the enterprises that deploy them are off the hook. Boards often assume that vendors take the fall, but that’s a misunderstanding that I think will land them in legal hot water as early as next year.
“None of the fixes are difficult, they just aren’t particularly popular. Businesses should name one accountable owner for AI governance, not a committee or working group, who can be asked to their face what went wrong. And they must take a hard, honest look at the tools they already run, asking the questions that never came up at signing.
“AI regulation is accelerating, so boards must be aware of the risks and make these changes now. Otherwise, legal fees, regulatory fines and reputational damage could be only a few months away.”
About John Margerison
John Margerison is an international entrepreneur focused on building trust-first, human-in-the-loop AI systems for enterprise. He is the CEO and founder of XFactorAi, the AI communications platform pioneering AI systems for enterprises and government environments. XFactorAi’s proprietary technology powers WorkPilot, which enables large enterprises to embed AI into their communications to streamline workflows, ensure compliance, and drive results.
