Emotion recognition artificial intelligence (Emotion AI) relies on analyzing biometric and behavioral data—like facial expressions, voice tone, keyboard typing patterns, and other cues—to infer a person’s emotions. Based on the principles of affective computing, which emerged in the 1990s, the technology integrates expertise from natural language processing, psychology, and sociology. With recent advancements in computing power and the abundance of data from IoT (Internet of Things) devices and sophisticated sensors, the market for Emotion AI is projected to grow significantly—from USD 3 billion in 2024 to USD 7 billion by 2029.
Emotion AI is being applied across various sectors, such as detecting potential criminal or harmful activities in public spaces, enhancing sales strategies with customer sentiment insights, and even supporting mental health therapy via AI-enabled chatbots. For example, an Australian startup is currently testing the world’s first emotion language model, capable of analyzing emotions in real time. Despite its potential, these applications face intense regulatory scrutiny due to ethical and legal concerns, particularly under the EU AI Act.
Introduced on August 1, 2024, the EU AI Act categorizes Emotion AI as either “High-Risk” or “Prohibited Use” based on application. Article 5(1)(f) of the Act, effective February 2, 2025, bans the usage of Emotion AI to infer emotions in workplaces or educational settings unless justified by safety or medical reasons. The prohibition reflects inaccuracies in Emotion AI systems, which may infer emotions based on cultural or personal variability. In February 2025, the European Commission released Guidelines further clarifying definitions and use cases under this law.
Two case studies highlight the complex implications of these new regulations. In the workplace, organizations often deploy sentiment analysis tools to train sales teams or analyze recruitment interviews. However, these practices may cross legal and ethical lines. For instance, a tech company using AI to evaluate sales agents’ emotional cues may claim the system is for training purposes, as suggested by the Guidelines’ exemption. Yet, the lack of clarity between the Act and the Guidelines may lead to disputes, especially if AI results influence performance reviews or promotions. Discrimination concerns could also arise, particularly for individuals with disabilities or non-native speakers of the language used.
Recruitment settings present similar challenges. AI systems analyzing candidates’ emotional states during interviews fall squarely under the Act’s prohibition, as clarified in the Guidelines. Employers may unintentionally amplify inequality, as biases inherent to Emotion AI algorithms could negatively affect candidates with diverse cultural backgrounds or neurodiversity.
Beyond workplaces, companies using Emotion AI for customer interactions must comply with provisions for High-Risk systems, effective August 2026. Violations of the EU AI Act carry severe consequences: the higher of either EUR 35 million or 7% of the organization’s annual worldwide turnover. When combined with penalties under GDPR, fines could total up to 11% of annual turnover. Moreover, reputational risks loom large for companies accused of deploying prohibited or controversial AI practices.
Ultimately, the rapidly expanding Emotion AI market demands rigorous governance. Organizations must adopt internal training, conduct thorough due diligence, and implement comprehensive AI audits to comply with current and forthcoming regulations. As the EU AI Act redefines permissible AI usage, businesses have an urgent imperative to align their innovations with legal and ethical standards to minimize risk while fostering trust.