NYC restricts use of AI tools in employment decisions

On January 1, 2023, New York City implemented local law 144, which significantly restricts the use of Automated Employment Decision Tools (AEDTs) to screen candidates or employees in hiring and promotion decisions (AEDTs may be powered by Artificial Intelligence). On April 5, 2023, the Department of Consumer and Worker Protection issued final regulations implementing the law, with enforcement commencing on July 5, 2023. Local Law 144 prohibits employers and employment agencies from using AEDTs in employment decisions unless:

  1. The AEDT has been subjected to bias audit testing within one (1) year of use;
  2. Information about the AEDT bias audit has been made publicly available on the employer’s website; and
  3. Notice has been provided to employees or job candidates about the use of such tools.

What are Automated Employment Decision Tools (AEDTs)?

An Automated Employment Decision Tool (AEDT) is a tool that “substantially assist or replaces” employers in making employment decisions. The law further elaborates in defining AEDTs as “any computational process, derived from machine learning, statistical modeling, data analytics, or artificial intelligence, that issues simplified output, including a score, classification, or recommendation, that is used to substantially assist or replace discretionary decision making for making employment decisions that impact natural persons.”

The law goes on to clarify what does not constitute an AEDT, stating that an AEDT is not one “which does not automate, support, substantially assist or replace discretionary decision-making processes and that does not materially impact natural persons.” Following public comment, the final regulations clarify the meaning of “to substantially assist or replace discretionary decision making,” to mean: “to rely solely on a simplified output (score, tag, classification, ranking, etc.), with no other factors considered; to use a simplified output as one of a set of criteria where the simplified output is weighted more than any other criterion in the set; or to use a simplified output to overrule conclusions derived from other factors including human decision-making.”  

Accordingly, AEDTs which merely produce data, scores or classifications which are one of several factors considered in the decision-making process, with no simplified output given greater weight and where discretion is still maintained by the employer are likely not to be considered AEDTs subject to the new requirements of the law.  

What Employers Need to Know

Employment decision is defined as “to screen candidates for employment or employees for promotion within the city,” thereby confining employment decisions to those related to hiring and promotion only. Other categories of employment decisions including termination and compensation appear to be excluded.  

The notice to employees or job candidates regarding the employer’s use of AEDTs must be provided no less than ten (10) days before use of the AEDTs with instructions on how to request an alternative selection process or a reasonable accommodation under other laws, if available. This notice obligation, however, does not require employers to provide an alternative selection process.  

The bias audit required to be performed prior to use of an AEDT must be an “impartial evaluation by an independent auditor.” The bias audit must include, but is not limited to, “the testing of an automated employment decision tool to assess the tool’s disparate impact on persons of any component 1 category required to be reported by employers pursuant to subsection (c) of section 2000e-8 of title 42 of the United States code as specified in part 1602.7 of title 29 of the code of federal regulations.” The aforementioned Component 1 categories refer to those on the EEO-1 Component 1 Report which is required to be filed annually by every employer subject to Title VII, and that has 100 or more employees.

Employers are advised to carefully review both the final regulations, which are detailed and complex in their requirements, as well as their current hiring and promotion practices to ensure compliance.  

Employers who violate the law are subject to a civil penalty of not more than $500 for a first violation and each additional violation occurring on the same day as the first violation, and not less than $500 nor more than $1,500 for each subsequent violation.

Disclaimer: The information contained herein is not intended to be construed as legal advice, nor should it be relied on as such. Employers should closely monitor the rules and regulations specific to their jurisdiction(s) and should seek advice from counsel relative to their rights and responsibilities.

By Megan Butz
General Counsel, HR Compliance, Checkwriters
Megan joined Checkwriters in 2020 and is responsible for reviewing, revising, and implementing internal policies of the company, advising on human resource, employment, and labor matters, and monitoring and publishing state and federal legal updates to the Checkwriters News and Compliance Center for distribution to thousands of clients around the country. Before joining Checkwriters, Megan served as a judicial law clerk for the justices of the Massachusetts Probate and Family Court performing legal research and writing, followed by private practice in Cape Cod.

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