NYC has issued final rules to implement an ordinance regulating employer use of automated employment decision tools (AEDTs) in hiring and promotions.Employers have until July 5, 2023 to determine whether they use an AEDT to make employment decisions, and if so, commission an independent bias audit; publish a summary of the results; provide notice to applicants and employees of the tool\u2019s use and functioning; and provide notice that affected individuals may request an accommodation or alternative selection process.\u00a0 \u00a0<\/p>\n
After several rounds of public comment and revision, on April 5, 2023 New York City published final regulations<\/a> implementing its first-in-the-nation ordinance that regulates the use of AI-driven hiring tools<\/a> (Local Law 144 of 2021, or \u201cNYC 144\u201d). \u00a0Initial regulations<\/a> relating solely to the penalty schedule were issued a year ago, on April 27, 2022. \u00a0New York City previously deferred enforcement of the law pending publication of final regulations. Now that the final rules have been published, enforcement of the law will begin on July 5, 2023.\u00a0 This gives employers less than three months to determine whether they are utilizing any AI-driven hiring or screening tools and, if so, take prescribed steps to ensure compliance.<\/p>\n NYC 144 prohibits employers or employment agencies from using an automated employment decision tool (AEDT) to make an employment decision unless the tool is audited for bias annually; the employer publishes a public summary of the audit; and the employer provides certain notices to applicants and employees who are subject to screening by the tool. NYC 144 likely applies only to New York City residents who are either candidates for hire in, or employees up for promotion to positions in, New York City, although neither the statute nor any regulation states this limitation clearly.<\/p>\n Does the Employer Use an AEDT to Make an Employment Decision?<\/p>\n The threshold question is whether an employer is using an AEDT to make a covered employment decision and thus subject to the audit and notice requirements of the law. \u00a0To answer this question, the employer must look to the technology that comprises the tool, and how and for what purposes the tool is used. \u00a0These terms sometimes overlap and are redundant; for ease, we have laid out a simplified 3-step framework for analysis below.<\/p>\n The statute defines AEDT to be:<\/p>\n any computational process, derived from machine learning, statistical modeling, data analytics, or artificial intelligence,that issues [a] simplified output, including a score, classification, or recommendation, that is used to substantially assist or replace discretionary decision making for \u2026\u2026 employment decisions that impact natural persons.<\/p>\n To determine whether a tool fits within the definition of AEDT, employers should ask themselves three questions: (1) does the technology used by the tool fall within the definition of AEDT? (2) is the tool being used in a way that brings it within the definition of AEDT? and (3) is the tool being used to make a covered employment decision within the definition of AEDT and NYC 144?\u00a0 The most efficient approach for employers will often be to consider these questions in reverse order, since this will spotlight situations to which the law clearly does not apply.<\/p>\n Does the tool make a covered employment decision? <\/p>\n The fairly narrow definition of covered \u201cemployment decisions\u201d is the simplest starting point for analysis.1\u00a0The statute provides that the only \u201cemployment decisions\u201d it covers involve hiring and promotion.\u00a0 Decisions regarding compensation, termination, workforce planning, labor deployment, benefits, workforce monitoring, and likely even performance evaluations, are beyond the reach of the law. \u00a0<\/p>\n The regulations also limit the scope of the law to candidates who have actually applied for a specific job.\u00a0 This means that the law does not apply to tools used to identify potential candidates who have not yet applied for a position. \u00a0<\/p>\n It is also important to note that the regulations restrict application of the law to hiring or promotion decisions that \u201cscreen\u201d candidates (for hiring) or employees (for promotion) by determining whether they \u201cshould be selected or advanced\u201d in the process. \u00a0Thus, for example, where an employer uses a tool to sort applicants into three tiers (\u201chighly qualified,\u201d \u201cqualified\u201d and \u201cless qualified\u201d), and as a practical matter does not advance any candidate who ranks \u201cless qualified,\u201d that use almost surely falls within the scope of the law. Conversely, if an employer uses a tool to assess a candidate\u2019s attention to fine detail, but that assessment is not the most important or determinative factor, but rather just one of many considered in deciding (in practice, not just theoretically) whether the candidate advances, that use may fall outside the definition of AEDT and thus the law.<\/p>\n Is the employer using the tool in a way that brings it within the definition of AEDT? <\/p>\n If the tool is in fact going to be part of a hiring or promotion screening decision, the next consideration is how output from the tool will be used in making that decision.\u00a0 An AI tool falls within scope of NYC 144 only when it issues a \u201csimplified output,\u201d2\u00a0and where that output is used to \u201csubstantially assist or replace discretionary decision making.\u201d The final regulations clarify that a covered tool\u2019s output \u2013 which may be a score, classification or recommendation \u2013 must be used in one of three ways:<\/p>\n as the sole criterion in making the employment decision, with no other factors considered;as a criterion that is given more determinative weight than any other criterion; orto overrule conclusions derived from other factors including human decision-making.<\/p>\n Any other use of an AI tool\u2019s output \u2013 for instance, where that ranking, score or classification is merely an equal part of the decision calculus for an individual \u2013 would appear to exempt that tool from the definition of an AEDT under the statute.\u00a0 So, for example, where an employer uses a tool to provide a ranking of candidates but does not rely solely on that ranking to advance the candidate, afford the ranking the most weight in its decision, or allow the ranking to overrule a human decisionmaker, that use probably falls outside the definition of AEDT and is not subject to the law\u2019s requirements. Conversely, if the employer uses a tool to rank 100 resumes, and advances only the first 20 (rejecting the other 80) solely on the basis of that ranking, such use does likely fall within the definition of \u201csubstantially assist or replace\u201d human decision-making.\u00a0<\/p>\n Determining the weight afforded an AI tool\u2019s output will ultimately become very fact-specific, and employers that determine their AI tool is exempt from coverage under NYC 144 because it is not used to \u201csubstantially\u201d assist or replace human decision-making, may have those determinations challenged. An employer using scores or ranking in its selection process will want to ensure and be able to demonstrate through adequate documentation that, in practice as well as on paper, its model falls outside any of the covered uses.<\/p>\n Does the tool\u2019s underlying technology fall within the definition of AEDT? <\/p>\n