Our colleagues at Venable recently wrote on the proliferation of artificial intelligence in employers’ hiring practices and the Equal Employment Opportunity Commission (EEOC) tips aimed at avoiding any discrimination against applicants on the basis of a disability. Beginning January 1, 2023, New York City employers who use artificial intelligence (AI) decision-making tools in their hiring practices will be required to educate applicants about the technology and conduct independent bias audits to s ensure that these tools have no impact. discriminatory impact on applicants. This alert will dig deeper into the requirements of the law and recommend best practices for ensuring compliance.
International local law. No. 1894-A
International local law. Law No. 1894-A (“the Law”) was signed into law by the City Council on December 11, 2022. The law, which is the first of its kind in the country, requires employers and recruitment agencies that use any “automated employment decision tool”:
- Conduct an annual “bias audit” of the tool and publish the results of the audit on the employer’s website;
- Provide ten days notice to applicants of the qualifications and characteristics sought by AI and allow them to request an alternative selection process; and
- Upon written request, make available “the type of data collected for the automated hiring decision tool, the source of that data, and the employer’s 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 generates simplified output, including including a score, classification, or recommendation, which is used to significantly assist or replace discretionary decision-making in making employment decisions that impact individuals.” 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 provides for civil penalties of $500 for an initial violation and up to $1,500 for each subsequent violation of the above requirements. The statute further provides a private right of action for applicants and employees and grants the New York City company attorney the ability to bring an action in any court of competent jurisdiction.
Importantly, the law states that “each day an automated employment decision tool is used in violation” of the law is a separate violation, as is each candidate who is not properly notified. This construction of what constitutes a violation means that unassuming employers can rack up very heavy penalties, making awareness and compliance all the more important.
What should employers do to ensure compliance?
Although the law does not take effect until January 1, 2023, New York City employers who use or plan to use 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 under the law. This employer due diligence process may require discussions with external vendors who use these tools on behalf of the employer, regarding the vendor’s anticipated compliance process and compensation protections for the employer for claims arising from provider services.
Employers must then provide notice of the use of these tools to candidates ten days prior to their use and allow candidates to request an alternative process or accommodation, and conduct regular bias audits on these tools (or ensure that suppliers carry out regular audits). Other than the legal requirement that the bias audit must be an “impartial assessment by an independent auditor”, there is no model for what such bias audits should look like under the law, so that employers will need to work with legal counsel to develop these processes.
Although the law currently only applies to New York City employers and applicants, California has similar legislation pending in the legislative process, and we anticipate that other jurisdictions will follow and enact similar laws to Local Law Int. No. 1894-A.