New York City employers who use Artificial Intelligence (“AI”) tools in hiring employees will soon be subject to new regulations aimed at curbing discrimination. Local Law 144, which goes into effect on April 15, 2023, will require City employers to test their AI recruitment tools for bias and post the results publicly.

According to recent guidance from the EEOC, some employers now use AI or other computer-based tools for hiring workers, monitoring performance, and determining pay or promotions, among other things. The technology takes the form of resume scanners, “chatbots” that screen candidates based on pre-defined requirements, and even video interviewing software that evaluates facial expressions and speech patterns.

The problem, according to the EEOC, is that these tools, more often than not, overlook whether the applicant could perform the job with a “reasonable accommodation.” A chatbot might, for instance, reject applicants with significant gaps in their employment history, even if the gap were caused by a disability or rule out a candidate with a speech impediment. In other words, the use of these tools may disadvantage those with disabilities, leaving employers open to liability under Equal Employment Opportunity laws and the Americans with Disabilities Act.

And this is more than theory.

Last year the EEOC brought suit in the United States District Court for the Eastern District of New York against iTutorGroup, which provides English-language tutoring to students in China, for allegedly violating federal law by programming their recruitment software to reject older applicants. (EEOC v. iTutorGroup, Inc., et al., Civil Action No. 1:22-cv-02565). The EEOC seeks back pay and liquidated damages for more than 200 applicants allegedly denied jobs because of their age.

In other words, the EEOC is taking this problem very seriously. The extent to which Local Law 144 addresses the issue is, however, a point of contentious debate.

Initially, the law contained broad language targeting all automated employment decision tools (“AEDTs”) that “substantially assist or replace” human employment decisions. But, after much commentary on the original proposal, the definition of AEDTs was significantly narrowed, and some contend it will have little to no practical effect. The Revised Proposed Rules released in December by the NYC Department of Consumer Affairs and Worker Protection (DCWP) specify that Local Law 144 will only apply to AEDTs that “(i) [ ]  rely solely on a simplified output (score, tag, classification, ranking, etc.), with no other factors considered; (ii) [ ] use a simplified output as one of a set of criteria where the simplified output is weighted more than any other criterion in the set; or (iii) [ ] use a simplified output to overrule conclusions derived from other factors including human decision-making.”

In other words, it is arguable that Local Law 144 will only apply where AEDTs replace human judgment either predominantly or altogether. And since AEDTs are typically used to identify pools of candidates, with final hiring decisions subject to human discretion, the loophole is significant.

The DCWP goes on to explain that Local Law 144 will require NYC employers to conduct a “bias audit” through an independent auditor when using AEDTs to classify candidates for employment or employees being considered for promotion. This involves calculating the impact of the AEDT gender; race and ethnicity; and intersectional categories of sex, ethnicity, and race. Additionally, the employer must post the summary of its most recent bias audit on its website, and include instructions on how someone can request an alternative selection process or a reasonable accommodation.

There are still some questions as to the scope of the law, i.e., whether the notice requirements are limited to employees and candidates who reside in NYC. In the meantime, the DCPW plans to enforce the law, still subject to revision, through fines between $500 and $1,500 per violation, per day. Employers using AI tools should stay tuned for further updates, as this new area of regulation continues to develop.

Rachel Morgenstern is a member of the Employment Law Practice Group at Ruskin Moscou Faltischek, P.C. For further information on whether and how Local Law 144 could affect your business practices, contact Rachel Morgenstern at 516-665-6537.