Today, artificial intelligence (AI) can be found in almost every workplace. From automated chatbots to software that quickly analyzes large amounts of data, businesses have implemented AI to improve the overall productivity of their operations and their employees. Notably, an increasing number of businesses have begun using AI to hire candidates and promote employees. However, as the use of AI has grown, there has been concern about the lack of transparency related to the AI’s algorithms, which may lead to unconscious bias in hiring and promotion decisions.
To address these concerns, in December 2021, the New York City Council enacted Local Law Int. No. 1894-A (the Local Law), amending New York City’s administrative code in relation to an employer’s use of an “automated employment decision tool” (AEDT) in the hiring and promotion process. New York City employers who use AEDTs have until January 1, 2023, to develop a bias audit process of any such tool and comply with the Local Law’s notice requirements.
Pursuant to the Local Law, an AEDT is any process involving “machine learning, statistical modeling, data analytics, or artificial intelligence” to produce a “score, classification, or recommendation” that is “used to substantially assist or replace discretionary decision making for making employment decisions.” The term explicitly excludes junk email filters, firewalls, antivirus software, calculators, spreadsheets, databases, data sets, or other compilation of data.
To use an AEDT, the employer must conduct a bias audit, which the Local Law defines as “an impartial evaluation by an independent auditor.” The independent auditor is tasked with assessing the AEDT’s disparate impact on a person’s race, ethnicity, or sex. The employer must conduct the bias audit no more than one year prior to the use of the AEDT and publish a summary of the results on the employer’s website, along with the AEDT’s “distribution date.”
Any employers using an AEDT in their hiring and promoting decisions are required to notify applicants that an AEDT will be used in connection with the assessment. Additionally, the notice should contain the job qualifications and characteristics that the tool will use in the assessment and allow the applicant to request an alternative selection process or accommodation. Notably, the notice must be sent on an individual basis at least 10 business days before the use of the AEDT.
Finally, if not already disclosed on the employer’s website, information about the type of data collected for the AEDT, the source of such data, and the employer’s data retention policy shall be available upon written request by an applicant. Employers must disclose the information within 30 days of the written request. However, employers do not need to disclose information if such disclosure would violate local, state, or federal law, or interfere with a law enforcement investigation.
Employers who violate the Local Law will be assessed a civil penalty of $500 for the first violation. Each subsequent violation will vary between $500 and $1,500. Further, each day the AEDT is used in violation of the Local Law counts as a separate violation and failure to provide any required notices will constitute a separate violation as well.
Given the numerous questions left to be answered regarding compliance with the Local Law, we expect forthcoming guidance to provide clarification on the employer’s obligations with respect to it. While the Local Law is not effective until January 1, 2023, employers using AEDT in their hiring and promoting decisions should begin evaluating their procedures to determine how to bring the procedures in compliance with the Local Law, such as developing an independent bias audit and notices to New York City applicants. Additionally, employers should note that the EEOC has recently announced an initiative to evaluate the use of AI in hiring and other employment decisions.
If you have any questions about how this impacts your business, please contact: