Our Venable colleagues recently wrote on the proliferation of artificial intelligence in employer hiring practices and the Equal Employment Opportunity Commission's (EEOC) guidance relating to avoiding discriminating against candidates on the basis of a disability. Starting on January 1, 2023, New York City employers that utilize artificial intelligence (AI) decision-making tools in their hiring practices will need to provide notice to applicants of the technology and conduct independent bias audits to ensure that these tools do not have a discriminatory impact on candidates. This alert will take a deeper dive into the requirements of the law and recommend best practices to ensure compliance.

Local Law Int. No. 1894-A

Local Law Int. No. 1894-A ("the Law") was enacted by the City Council on December 11, 2022. The Law, which is the first of its type in the nation, requires that employers and hiring agencies that use any "automated employment decision tool":

  • Conduct a yearly "bias audit" of the tool and publish the results of the audit on the employer's website;
  • Provide ten days' notice to candidates of the qualifications and characteristics that AI will be looking for, and allow them to request an alternative selection process; and
  • Upon written request, make available "the type of data collected for the automated employment decision tool, the source of such data and the employer or employment agency's data retention policy."

An "automated employment decision tool" is defined 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." Among other examples, this definition would likely encompass computer tools that screen employees by requiring a minimum degree or GPA, interviewing software, and software that "tests" applicants and provides "job fit" scores. The Law carries civil penalties of $500 for an initial violation and up to $1,500 for each subsequent violation of the above requirements. The Law further provides a private right of action to applicants and employees and grants New York City's corporation counsel the ability to file suit in any court of competent jurisdiction.

Importantly, the Law states that "each day on which an automated employment decision tool is used in violation" of the Law is a separate violation, as is each applicant who isn't properly on notice. This construction of what constitutes a violation means that unassuming employers can rack up very large penalties, making awareness and compliance all the more important.

What Should Employers Do to Ensure Compliance?

Although the Law does not go into effect until January 1, 2023, New York City employers that utilize or are contemplating utilizing AI decision-making tools should begin taking steps to ensure that they are in compliance.

As a first step, employers need to understand what automated recruiting tools they use and whether those tools fall within the statute. This employer diligence process may require discussions with outside vendors that employ such tools on behalf of the employer, regarding the vendors' anticipated compliance process and indemnification protections for the employer for claims arising out of the vendor services.

Employers then must provide a notice of the use of such tools to applicants ten days in advance of their use and allow candidates to request an alternative process or accommodation, and regularly run bias audits on those tools (or ensure vendors run regular audits). Aside from the statutory requirement that the bias audit be an "impartial evaluation by an independent auditor," there is no template for what these bias audits should look like under the Law, so employers will need to work with legal counsel to develop these processes.

While the Law currently applies only to New York City employers and applicants, California has a similar law pending in the legislative process, and we expect that other jurisdictions will follow suit and enact laws similar to Local Law Int. No. 1894-A.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.