A China-based tutoring company has agreed to settle a U.S. government agency's novel lawsuit claiming it used hiring software powered by artificial intelligence to illegally weed out older job applicants.

The 2022 lawsuit against iTutorGroup Inc was the first by the U.S. Equal Employment Opportunity Commission (EEOC) involving a company's use of AI to make employment decisions.

The commission, which enforces workplace bias laws, in 2021 launched an initiative to ensure that AI software used by U.S. employers complies with anti-discrimination laws. The EEOC has warned that it will focus enforcement efforts on companies that misuse AI.

ITutorGroup agreed to pay $365,000 to more than 200 job applicants allegedly passed over because of their age, according to a joint filing made in New York federal court on Wednesday. The settlement must be approved by a federal judge.

The company, which provides English-language tutoring to students in China, denied wrongdoing in the settlement.

The EEOC had alleged that iTutorGroup in 2020 programmed online recruitment software to screen out women aged 55 or older and men who were 60 or older.

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