New York City passed a one-of-a-kind law that will require employers to audit automated decision-making tools used to evaluate job candidates and employees.  AI and algorithm-based technologies used for hiring and promotions must be audited for bias that could lead to discrimination based on race, sex, age, or national origin.  Employers will have all of 2022 to prepare, as the law is effective January 1, 2023.  This law applies to employers with employees/applicants, whether those seeking to join the company or current employees seeking a different position with the company who resides in New York City.

The law requires employers to arrange for an independent auditor to complete an annual evaluation of automated tools that use machine learning, statistical modeling, data analytics, or artificial intelligence to score, classify, or otherwise make a recommendation regarding candidates and to assist or replace an employer’s decision-making process for promotions and offers of employment.  Employers must maintain a summary of the bias auditing findings on their website.

The new law also contains a notice requirement, mandating employers notify the employee and/or applicant at least ten business days in advance about (1) the use of an automated decision tool in connection with the employment decision, and (2) the types of qualifications and characteristics that such automated employment tool will use in assessing the employee and/or applicant.  Notably, the employee and/or applicant must be given the opportunity to request an alternative selection process.  Currently, there is no guidance as to what this alternative selection process entails, or whether an employer must accept such a request, or under what circumstances an employer is permitted to decline the request.

Employers that fail to comply may be subject to a fine of up to $500 for a first violation and then daily fines of between 500 and $1,500 for each subsequent violation.  Each day on which an AI tool is used in violation of the law constitutes a separate violation, and the same is true for failures to follow the notice requirements.  Given the broad scope of the law, we anticipate guidance later in 2022.  However, we recommend employers evaluate their automated systems now and consult with any vendors used for their AI technology.

If you have any questions regarding New York City’s rule, please contact your labor and employment counsel at Smith, Gambrell & Russell, LLP.