On April 6, 2023, the New York City Department of Consumer and Worker Protection issued its final rule interpreting the City’s Local Law 144 regulating the use of "automated employment decision tools," which went into effect on January 1, 2023. These AI-powered tools—ranging from programs that screen resumes for basic qualifications to those that assess and assign scores to candidates based on mannerisms and responses in video interviews—are increasingly being used by employers, but have generated controversy due to the potential for bias. The new regulations provide important guidance and clarification on Local Law 144’s requirements, and employers in the City should ensure that any automated tools used in their human resources processes are compliant with the new requirements.

First, the regulations clarify the types of "automated employment decision tools," or AEDTs, that are subject to Local Law 144. The ordinance defines AEDTs as a "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." The regulations clarify when an AEDT will be found to "substantially assist or replace discretionary decision-making, listing three scenarios that will subject an AEDT to Local Law 144:

1. The employer relies “solely” on the AEDT’s score, ranking, or recommendation in making employment decisions;

2. The employer relies on other factors in addition to the AEDT’s output, but weighs the AEDT’s output more heavily than any other criterion; or

3. The AEDT’s output is used in a way that can overrule conclusions from other factors, including human decision-making.

Employers using AEDTs in their hiring or promotion selection processes would therefore be well-served to adopt policies explicitly setting out how the AEDT’s output is used in the process.

The regulations also address the bias audits required by Local Law 144. An employer’s use of an AEDT in the City is unlawful unless the AEDT has undergone a bias audit within the year prior to its use. Bias audits must be conducted by an independent auditor who, as the regulations provide, (i) has not been involved in the use, development, or distribution of the AEDT, and (ii) does not have an employment relationship with or financial interest in, the employer or a vendor that develops or distributes the AEDT. The bias audit must assess the selection or scoring rate and impact ratio for each rating or classification assigned by the AEDT based on EEO-1 sex, race, and ethnicity categories, as well as intersectional categories of sex, ethnicity, and race (i.e., white females vs. Hispanic males). The regulations also prescribe what types of data (i.e., single employer data, multi-employer data, or test data) can be used in the audit. Employers implementing AEDTs will need to obtain and closely review bias audits for the AEDT to ensure compliance with Local Law 144.

Finally, the regulations address the notices of AEDT usage required by Local Law 144. Employers using an AEDT must provide notice to employees and applicants of the AEDT’s use and publish a summary of the results of the most recent bias audit for the AEDT. The regulations confirm that these notices can largely be provided through the employer’s website if certain conditions are met, but to the extent AEDTs are used in promotion decisions, additional notice must be circulated to existing employees through a written policy or other means. The regulations confirm that although the employer must notify employees and applicants of a procedure to request an alternative selection procedure not utilizing an AEDT, employers are not required to provide an alternative if requested. Finally, the regulations also outline the employer’s obligation to retain documents regarding the use of AEDTs and produce them to employees upon request, unless releasing the records is otherwise barred by law.

New York City’s Local Law 144 is the most comprehensive regulation to date of the use of artificial intelligence and machine learning applications in human resources, but employers should expect other jurisdictions to quickly follow suit given the recent media attention to ChatGPT and other AI applications. In light of the new regulations, employers will need to take stock of what AI applications they are using in their human resources processes and how those applications are being used, and ensure that the applications are supported by appropriate bias audits and notices.