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NYC Law Regulating the Use of AI in Employment Decisions

On November 10, 2021, the New York City (NYC) Council passed a bill (Int 1894-2020) that regulates employers and employment agencies’ use of “automated employment decision tools” in making employment decisions. Because the bill was returned without former Mayor Bill de Blasio’s signature, it lapsed into law on December 11, 2021, and it will take effect on January 1, 2023.

The new law prohibits an employer or employment agency from using an automated employment decision tool in making an employment decision unless, prior to using the tool, the following requirements are met:

  • The tool has been subject to a bias audit within the last year; and
  • A summary of the results of the most recent bias audit and distribution data for the tool have been made publicly available on the employer or employment agency’s website.

The bias audit is considered an impartial evaluation that has to be conducted by an independent auditor. The auditor will be responsible for testing the employer’s AI tools to determine if the use of the tool(s) creates a disparate impact on any protected classes.

The law also has notice requirements. Employers and employment agencies who use AI tools in employment decisions must notify a candidate or employee who resides in NYC at least 10 business days before using the tool that an automated employment decision tool will be used in assessing their job qualifications and characteristics. The purpose of the notice requirement is to allow the candidate or employee to request an accommodation or an alternative process. However, the law does not address whether the employer is obligate to honor any such request for an accommodation or alternative process. In addition, a candidate or employee may submit a written request for certain information regarding the employer’s use of AI, if said information has not been previously disclosed on the employer’s website, including:

  1. The type of data collected for the automated employment decision tool,
  2. The source of such data, and
  3. The employer’s data retention policy.

Employers are required to respond within 30 days of receiving such a request.

There are penalties for non-compliance as follows:

  • A civil penalty of up to $500 for the first violation and each additional violation occurring on the same day as the first violation; and
  • A civil penalty between $500 and $1,500 for each subsequent violation.

Furthermore, each day the automated employment decision tool is used in violation of the law constitutes a separate violation and the failure to provide any of the required notices constitutes a separate violation.

Next Steps for Employers

Employers should carefully examine any AI tools they plan to use in their internal and external recruitment, hiring and promotion processes in 2023 and beyond. Specifically, employers may consider conducting a preliminary bias audit with an independent auditor to determine whether their current technology will meet the requirements of the law or whether it is necessary to adjust, modify or discontinue use of any applicable AI tools.

It is recommended that employers and employment agencies work with their legal counsel to develop and implement practices that comply with the notice provisions required by the law.

HR Works, headquartered in Upstate New York, is a human resource management outsourcing and consulting firm serving clients throughout the United States for over thirty years. HR Works provides scalable strategic human resource management and consulting services, including: affirmative action programs; benefits administration outsourcing; HRIS self-service technology; full-time, part-time and interim on-site HR managers; HR audits; legally reviewed employee handbooks and supervisor manuals; talent management and recruiting services; and training of managers and HR professionals.