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New York Update: NYS Amends WARN Regulations and NYC Provides Guidance on New Law Concerning Use of AI in Hiring (US)
Tuesday, July 11, 2023

New York State (NYS) and New York City (NYC) have been characteristically busy – enacting, amending and clarifying employment legislation.[1] This blog post discusses two significant changes: (1) amendments to the New York State WARN Act (NY WARN) regulations, which impacts New York employers state-wide, and (2) agency guidance clarifying employers’ compliance obligations with respect to NYC Local Law 144, which is NYC’s new AI bias law.

NY WARN Act Regulations Amended

In late March 2023, the New York State Department of Labor (DOL) released proposed amendments to its NY WARN regulations. Earlier that month, a bill which would significantly expand[2] the scope of NY WARN was introduced in the New York Senate. While the bill is currently still with the Labor Committee, amendments to the NY WARN regulations took effect on June 21, 2023, and include the following noteworthy changes:

  • Employer Coverage: NY WARN applies to private sector employers who employ at least 50 full-time employees located in NYS, whereas federal WARN applies to employers with at least 100 full-time employees. As amended, the NY WARN regulations now specify that “individuals who work remotely but are based at the employment site” are counted in determining whether an employer meets the minimum 50-employee threshold. This amendment recognizes the post-COVID reality that many employees continue to work remotely.

  • Notice to DOL Commissioner – Method:  Notice to the DOL Commissioner must now be “provided electronically in the manner [prescribed] …on the Department’s website.”  Previously, notice to the Commissioner could be mailed or faxed, and required an “original signature of the employer representative.” In May 2023 the NYS DOL went live with a new WARN Portal where employers can submit notice to the Commissioner electronically, and this amendment essentially makes submission via the portal mandatory.

  • Notice to DOL Commissioner – Content:  Notice to the DOL Commissioner now must include certain information about each affected employee, including the employee’s name, address (including home address), personal phone number, personal email address, job title, work location, full or part-time status, whether the employee was paid on an hourly, salary or commission basis, and any affiliation that the employee has to an employee representative (e.g., a labor union). Employers will have to submit this information using the “Affected Worker Template” spreadsheet provided on the WARN Portal. Interestingly, some employee information required by the amended regulations (e.g., email address, phone number and wage) are listed as “optional fields” on the template.

  • Notice to Affected Employees:  Notice to affected employees must now include: “Any additional information known at the time of the notice and relevant to the separation, including but not limited to information on severance packages or financial incentives if the employee remains and works until the effective date of the mass layoff, relocation or employment loss, available dislocated worker assistance, and, if the planned action is expected to be temporary, the estimated duration.” Under federal WARN, notice may include “additional information useful to the employees” (e.g., the estimated duration of a temporary layoff or plant closing); under NY WARN, covered employers must include this information.

  • Notice Exceptions: Subject to certain exceptions, employers covered under NY WARN must provide affected employees with 90 days’ notice of a plant closing or mass layoff, whereas federal WARN requires only 60 days’ notice. Invoking an exception to NY WARN now requires employers to go through additional administrative hurdles. Under the amended regulations, employers must submit a statement to the DOL Commissioner explaining the reason for the mass layoff or plant closing and a description of the basis for an exception within 10 business days of the required notice being provided to the Commissioner, unless an extension of time is granted. Employers must also submit documentation “relevant to the determination of whether the employer is eligible to avail itself” of an exception, and an affidavit signed under penalty of perjury stating that the documents are true and correct. Employers will have to submit this information via the WARN Portal, and employers who fail to submit the required information will be barred from invoking an exception.

  • Payment in Lieu of Notice:  Under NY WARN, employers may reduce their liability for failing to provide notice by (1) paying “any wages” (except accrued vacation time) during the violation period, or (2) making any other voluntary/unconditional payments (e.g., severance) not required under a separate contract or law. The updated regulations do not change this. However, the revised regulations do establish three new conditions that must be met for payments to constitute wages, and provide that if these conditions are not met, the payment “shall be treated as severance pay.” Amounts paid in lieu of notice are treated as wages if:

    • (i) the employer is required, under an employment agreement or a uniformly applied company policy, to give the employee a definite period of notice before a layoff or separation;

    • (ii) the employee is laid off or separated without the required notice; and

    • (iii) the employee is paid an amount equal to their regular wages and the value of the costs of any benefits, or an amount determined based on the employee’s past earnings and benefits costs, for the required period of notice.

Guidance on NYC Local Law 144

The exponential growth of AI is beginning to reshape virtually all aspects of modern life, including working life. Employers are increasingly using AI tools to handle various Human Resources tasks such as recruiting, screening, and hiring. However, skeptics have noted the potential for bias within the algorithms used by AI-based HR tools, which could lead to discriminatory hiring and selection practices.

Thus, on November 10, 2021, the NYC Council passed Local Law 144, a first-of-its-kind law regulating the use of AI – specifically, automated employment decision tools (AEDT) – in employment related matters. The law went into effect on January 1, 2023, and, after a series of delays, enforcement began on July 5, 2023.

Broadly speaking, Local Law 144 prohibits employers and employment agencies from using an AEDT to make an “employment decision” in NYC without first subjecting the AEDT to a “bias audit” no more than one year prior to its use and providing required notices.

Not surprisingly, employers raised many questions about Local Law 144. In an effort to address those questions, on June 29, 2023, the NYC Department of Consumer and Worker Protection (DCWP) – the agency charged with enforcing Local Law 144 – published a FAQ document clarifying employer coverage and obligations under Local Law 144, including:

  • Who is Covered by Local Law 144? The FAQ clarify the geographic scope of Local Law 144. For employers, the term “in the city” means either: (1) the job location is an office in NYC, at least part time; or (2) the job is fully remote, but the location associated with it is an office in NYC. Thus, an employer with remote workers in NYC, but with no physical presence in NYC, would not be covered. However, certain issues – including most notably how a remote position is “associated” with a NYC office – are left unexplained.

  • What is an “Employment Decision”?  The term “employment decision” means “to screen candidates for employment or employees for promotion within the city.” The FAQs confirm that the term is not limited only to the final hiring or promotion decision. Rather, Local Law 144 applies whenever a NYC employer or employment agency uses an AEDT to “substantially help them assess or screen candidates at any point in the hiring or promotion process.”

  • What is a “bias audit”?  Local Law 144 defines a “bias audit” as “an impartial evaluation by an independent auditor.” The FAQs clarify that bias audits must be performed every year and include, at a minimum, “calculations of selection or scoring rates and the impact ratio across sex categories, race/ethnicity categories, and intersectional categories.” The FAQs further explain that demographic information may not be imputed or inferred; rather, bias audits must rely on historical data (the data collected during an employer’s use of an AEDT). If the historical data is not statistically significant, then test data or the historical data of other employers or employment agencies may be used.

NYC employers should carefully review the FAQ, which addresses a number of additional issues, such as employer notice requirements, complaint procedures, and more. As always, we will continue to monitor and update for future developments.

[1] Recent changes include: (1) enacting and subsequently amending a statewide pay transparency law; (2) amending the City’s human rights law by prohibiting discrimination based on height or weight; (3) amending the State’s human rights law by prohibiting discrimination based on citizenship or immigration status; (4) expanding NYS employers’ lactation accommodation requirements; (5) releasing updated model sexual harassment prevention and lactation accommodation policies; and (6) mandating that NYS employers provide digital versions of certain workplace posters through the employer’s email or website.

[2] If this bill passes, NY WARN would cover any employer (including any “affiliate of an employer”) that employs 50 or more employees (including part-time employees). Further, NY WARN’s definition of a “mass layoff” would be significantly broadened to include the termination of 20 or more employees in a 30-day period, regardless of whether they comprise at least 33% of the workforce. Liability waivers would be prohibited “unless supervised by a court, the commissioner or certified class counsel,” and covered employers would be required to provide affected employees with one week of severance pay for every full year of employment (in addition to notice). Employers who fail to provide notice would be on the hook for an additional four weeks of severance pay.

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