Technology has paved the way for advancements that have changed the way we work. For example, employers can now use artificial intelligence to optimize the hiring process. AI-driven tools designed to review and sort applicants can save HR professionals considerable time, but these time-saving measures can have unintended consequences.
NYC Local Law 144 places heavy regulations on how automated tools can be used during hiring. New York City employers must comply with these rules governing the use of AI hiring tools.
Here’s what employers need to know about NYC Local Law 144, AI tools in the hiring process, and how Mosey can help with corporate compliance.
How Is AI Used in Hiring?
AI has recently been a hot topic of conversation, with many people questioning how artificial intelligence may affect their jobs. There has also been concern about how AI may prevent people from obtaining a job in the first place.
Automated hiring tools use artificial intelligence to scan resumes, disqualifying some applicants from consideration and only advancing those it believes to be ideal for employers. Given this process, concerns have been raised about algorithmic bias in these AI tools.
Algorithmic bias means that artificial intelligence and other machine learning models may use arbitrary or inaccurate data to determine what makes a candidate “qualified” for an available position. This data can cause equity issues in hiring, like discrimination against women or applicants of color.
The hiring bots, called Automated Employment Decision Tools (AEDT), have not yet proven accurate enough to replace a real human resources employee. Some employers continue to use these controversial tools in their screening processes despite concerns that they may place equally qualified candidates at unfair advantages.
What Is NYC Local Law 144?
NYC Local Law 144 took effect in January 2023. The law limits how employers can use artificial intelligence tools in hiring. Under this law, any tool that uses machine learning, algorithms, artificial intelligence, data analysis, or statistical modeling is considered an AEDT.
AEDTs are now heavily regulated. If a company uses AEDTs, those tools must undergo an annual independent audit to measure bias. Bias auditing must examine how the AEDT evaluates candidates across race, gender, and intersectional groups. AEDTs that show evidence of bias cannot be used in the process of reviewing applications or hiring employees.
Audit results must be shared with the public, as candidates have a right to know if AEDT was utilized in their rejection or denial of an offer. Candidates must receive notice at least 10 days before using AEDTs in the evaluation process.
Applications cannot be reviewed and candidates cannot be considered using bias-audited AEDT unless they have been informed that AI tools will be used in the hiring process.
Who Must Abide by NYC Local Law 144?
Local Law 144 applies to any full-time or part-time job in New York City, including remote jobs based in the city that hire outside its limits. Candidates don’t need to live in the New York City area to be covered by the law, which also applies to foreign corporations doing business in New York City.
The law governs recruiters or job assistance services based in New York City, even if they review or hire candidates for employees outside of New York.
Does NYC Local Law 144 Apply to Candidate Outreach?
The law only applies to companies that post job openings or accept resumes. If you’re using an automated tool to scan a resume bank, the law does not apply. The individuals you’re scanning or researching are not technically applicants unless and until they directly apply for a position within your company.
You only need to abide by the law if someone directly contacts you regarding employment. The law would also apply if you invite someone to formally apply for a job.
How To Comply With NYC Local Law 144
Compliance with NYC Local Law 144 can be extensive. Its purpose is to dissuade New York City employers from using AI tools in the hiring process. While AI tools are still legal to use, the specifications for compliance are rigorous. Even when employers comply, there may still be consequences for decisions made by AEDT tools.
Review Candidates Manually
Compliance with Local Law 144 can be costly. Employers need to pay to license an AEDT tool and an independent auditor to conduct bias audits. Consequently, the price of maintaining an AEDT tool can become prohibitive.
The easiest way to comply with NYC Local Law 144 is to avoid using automated review or evaluation tools in hiring. Small businesses with limited resources may be unable to afford the financial cost or time commitment of the upkeep process. There’s nothing wrong with hiring people the old-fashioned way, especially if you’re a small business.
Additionally, the law only applies to employers who use technology to review candidates. You can’t make a mistake if you don’t use regulated tools.
Conduct Bias Audits
Employers are required to conduct bias audits using historical data from within the company. If the company doesn’t have enough history using the AEDT tool, it can use historical data shared by other companies that use an identical tool as part of its evaluation.
An independent auditor must perform audits. The auditor or auditing service cannot have any financial ties to your company, the company that provides the AEDT tool, or its parent company. This third-party auditor is responsible for performing the tests to determine bias susceptibility within your AEDT.
The auditor must check for bias for or against gender, race, ethnicity, or intersectional groups. The auditor should then identify and alert you of the bias in an official report. Retain the results of your report and post it on your website.
Inform Candidates of AEDT Use
Candidates must be informed at least 10 days before using AEDT that automated tools will be used to review their information. The easiest way to inform candidates is to place a disclaimer in your job ad or posting that you use these tools to review resumes. Then, wait ten days after receiving an application or resume to conduct an automated evaluation with your AEDT.
AEDT rules also apply to employees who have already been hired for a role within your company. If you use AEDT to review candidates for promotion or lateral moves, you must include an AEDT notice in your employee handbook.
Many employers choose to place a general notice regarding AEDT use on their company website. As long as the notice is conspicuous, it can be assumed that candidates were given notice of the use of AI in their hiring.
How Is NYC Local Law 144 Enforced?
NYC Local Law 144 is enforced by the NYC Department of Consumer and Worker Protection (DCWP). The DCWP can issue penalties and fines if an organization is found to be non-compliant with AEDT regulations.
These penalties include:
- $500 Fine for Each Violation on the Same Day: If your AEDT program isn’t up to standard, you can receive a $500 fine per application or candidate screened each day your AEDT program is used without following legal protocol.
- Repeat Offenses: Fines can increase to $1,500 per incident for repeat offenses.
- Failure To Audit: Each day an AEDT is used without a satisfactory audit is also considered an offense.
If someone feels as though they were denied a position based on the discriminatory bias of an AEDT tool, they can contact the NYC Commission on Human Rights. The Commission will launch an investigation to determine the validity of the claim.
If the AEDT tool exhibits discriminatory bias, the employer is responsible for the AEDT’s actions. The employer may face penalties for discrimination, and employees who were discriminated against may be able to file a discrimination lawsuit.
Remember, actions performed and decisions made by your AEDT tools are considered your actions and decisions as an employer under the law.
Maintain Compliance With Mosey
Business compliance requirements can be complicated, as is undoubtedly the case with Local Law 144. It’s vital to perform independent bias audits regularly and inform candidates of the tools you use.
Mosey’s compliance management platform is designed to help employers keep track of state and local business requirements. Schedule a demo with Mosey to learn how we can help you stay compliant.
