New Law Enacted: 12/11/2021
Takes Effect: 1/1/2023
Many companies use Artificial Intelligence (“AI”) and Automated Decision Systems (“ADS”) to help quicken the pace involved in evaluating potential candidates for employment. These tools have the ability to: (1) scan a candidate’s online presence; (2) evaluate resumes by searching for certain keywords; and (3) determine whether a candidate is suitable for a given position (among other things).
Businesses and employment agencies often assert that these technologies go one step further and reduce or limit the amount of implicit bias that might otherwise exist when human beings are sifting through candidates’ resumes and job applications. However, others believe that there is a potential for bias that exists within the actual algorithms that make up such technologies. To address this purported bias issue, in January 2023, a new law that will take effect in New York City that many employers and employment agencies will need to comply with.
General Summary of the Law:
According to the bill’s sponsors, the Law will require that a bias audit be conducted on all AEDTs prior to the use of said tools.
Where the Law is Codified:
The Law will amend the Administrative Code of the City of New York and will be referred to as Subchapter 25, Automated Employment Decision Tools (the “Law”).
What is an Automated Employment Decision Tool within the Meaning of the Law?
According to the Law’s definitions section, an AEDT includes “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.”
What Tools are NOT AEDTs Under the Law?
The Law does not apply to tools that do not automate, support, substantially assist or replace discretionary decision-making processes and that do not materially impact people, including, but not limited to, things such as junk email filters, firewalls, antivirus software, calculators, spreadsheets, databases, data sets, or other compilations of data. More simply, this means that standard, non-analytic technology and associated data would not be swept into the purview or scope of the Law.
What is Meant by a Bias Audit?
The new Law is directed at companies in NYC (namely, employers and the employment agencies that work with them) that incorporate the use of AEDTs in hiring and recruiting employees residing in NYC. The Law specifically requires such companies to conduct a bias audit when utilizing AEDTs. A bias audit is defined as “an impartial evaluation by an independent auditor.” While the Law does not elaborate much on what is required, it does indicate that the audit should include the “testing of an automated employment decision tool to assess the tool’s disparate impact” on employment candidates.
What Does “Employment Decision” Mean Under the Law?
This is another key component that goes into understanding what is required under the Law. Employment Decision is defined as the “screen[ing of] candidates for employment or employees for promotion in NYC.”
Who Must Comply with the New Law?
- The Law appears to apply to employers and employment agencies in NYC that are evaluating candidates for employment who reside in NYC. Whether the law is in fact limited to companies located in NYC or is broader in application and covers any companies that evaluate NYC resident candidates (regardless of business location) is unclear from the face of the legislation. Hopefully, guidance on this important issue will be published by the City.
- According to New York State law, an employment agency is defined, in pertinent part as, “any person . . . who, for a fee, procures or attempts to procure: (1) employment or engagements for persons seeking employment or engagements, or (2) employees for employers seeking the services of employees.”
- Please note that under New York State law, employment agencies are required to obtain a license issued by the Commissioner of Labor to perform such services.
What is Prohibited by the Law:
The Law explains that it is unlawful for an employer or employment agency to use an AEDT to screen a candidate or employee for an employment decision UNLESS:
- Such tool has been the subject of a bias audit conducted no more than one year prior to the use of such tool; and
- A summary of the results of the most recent bias audit of such tool, as well as the distribution date of the tool to which such audit applies, has been made publicly available on the website of the employer or employment agency prior to the use of such tool.
The plain language of the new Law seems to be focused on those employers and employment agencies in NYC that use AEDTs for purposes of screening NYC resident candidates. The subject employer/agency must notify the employee or candidate of the following information in advance of use:
- That an automated employment decision tool will be used in connection with the assessment or evaluation of such employee or candidate that resides in the City. Such notice shall be made no less than ten business days before such use and allow a candidate to request an alternative selection process or accommodation;
- The job qualifications and characteristics that such automated employment decision tool will use in the assessment of such candidate or employee. Such notice shall be made no less than 10 business days before such use; and
- If not disclosed on the employer or employment agency’s website, information about the type of data collected for the AEDT, the source of such data and the employer or employment agency’s data retention policy shall be available upon written request by the candidate or employee. Such information shall be provided within 30 days of receipt of the written request.
Failure to Comply:
The Law is scheduled to go into effect on January 1, 2023. Unfortunately, to date, NYC has not released any interpretative compliance guidance. As with most regulations, companies that fail to comply with the new Law will be subject to civil penalties. The Law contemplates fines of $500 for initial violations and up to $1,500 for each subsequent violation.
The material contained herein is provided for informational purposes only and is not legal advice, nor is it a substitute for obtaining legal advice from an attorney. Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced attorney.