United States: NYC Employers Take Note: November 4th Public Hearing Set For Rules On NYC Law Restricting Automated Employment Tools

Background on the Law

Starting January 1, 2023, New York City will prohibit employers and employment agencies from using automated employment decision tools¹ for employment decision in New York City unless the tools have undergone a bias audit within one year before the use of the tool, information about such audit is made publicly available on a website with a summary of the bias audit results and distribution date, and certain notices have been provided. The purpose of the audit is to assess the tool's disparate impact on women and minorities.² (Local Law 144 of 2021; "AI Law").

Specifically, the AI Law requires any employers and employment agencies that use an automated employment decision tool to screen an employee or candidate who has applied for a position to notify that employee or job candidate—if they reside in New York City-- that an automated employment decision tool will be used to assess or evaluate their candidacy for hire or promotion, and the job qualifications and characteristics that will be used in assessing the candidate or employee. The notice must allow a candidate to request an alternative selection process or accommodation. Additionally, if information about the type of data collected for the automated employment decision tool, the source of such data and the employer or employment agency's data retention policy is not disclosed on the employer or employment agency's website, it must be made available to a candidate or employee within 30 days of a written request (unless otherwise prohibited by law).

Penalties

Employers who violate this law are liable for a civil penalty of not more than $500 for a first violation and each additional violation occurring on the same day as the first violation, and between $500 and $1,500 for each subsequent violation. Failure to provide any required notice is a separate violation and each day on which the tool without compliance with the law is used is a separate violation. No cap or maximum penalty is indicated in the law.

Legal Recourse

The law states that the New York City's Corporation Counsel or their designee can commence an action in court to correct any violation of the law, mandate compliance, and seek other relief. However, the law also states that it does not prohibit any private right of action by an aggrieved candidate or employee or a proceeding by the New York City Commission on Human Rights to enforce the New York City Human Rights Law.

Proposed Rules and Public Hearing

On September 23, 2022, the New York City Department of Consumer and Worker Protection ("DCWP") announced its proposed rules to implement the law. The DCWP has stated that its proposed rules would clarify employers' and employment agencies' obligations under the law.

What do the Proposed Rules Address?

Specifically, the DCWP's proposed rules:

(1) define various terms;

(2) explain the bias audit requirements, including that a bias audit of an automated employment decision tool ("AEDT") must: (a) calculate the selection rate for each race/ethnicity and sex category that is required to be reported to the U.S. Equal Employment Opportunity Commission ("EEOC") pursuant to the EEO Component 1 report, (b) compare such selection rates to the most selected category to determine an impact ratio for each category, and (c) where the tool classifies individuals into groups, perform calculations of the selection rate and impact ratio for each such classification;

(3) clarify the requirements for the published results of the required bias audit (i.e., the results must be published either in the careers or jobs section of an employer's website in a "clear and conspicuous manner" or by active hyperlink to another website showing a summary of the results and distribution date³) and recordkeeping requirements; and

(4) clarify the requirements for notices that employers and employment agencies must provide to job applicants and employees, identify what information the required notices must include—such as instructions to a job applicant for how to request an alternative selection process or accommodation, and how, when, and where the notices must be communicated. They also address what steps to take if the notice is not included on the website or the entity refuses to disclose information for legal reasons.

While the law provides that job candidates have the right to request an alternative selection process or accommodation, the proposed rules state that employers do not need to provide an alternative selection process. The proposed rules remain silent on the definitions of "alternative selection process" or "accommodation," how those terms will be implemented, a time frame for an employer response to a candidate's request, or any process required to notify the applicant of whether the request was granted or denied.

Submitting Comments on the Proposed Rules

Employers intending to provide public comment must do so by 11:59 p.m., November 4, 2022, by: (1) submitting comments to DCWP through the NYC rules website at http://rules.cityofnewyork.us; (2) emailing comments to Rulecomments@dcwp.nyc.gov; and/or (3) commenting on the proposed rules at the public hearing by signing up in advance to speak at the November 4^th public hearing.

Public Hearing

On Friday, November 4, 2022 at 11 a.m., the New York City Department of Consumer and Worker Protection will hold a public hearing that will be accessible by phone and Zoom video conference, previously scheduled for October 24^th.

To participate in the November 4^th public hearing via phone, individuals can dial 646-893-7101; Meeting ID: 237 708 527 692; Passcode: 4kF5as

To participate in the public hearing via video conference, individuals can use the online link: https://teams.microsoft.com/registration/x2_1MoFfIk6pWxXaZlE77w,PgVNkwMwUkqnyO28hSWZzg,UWNLEqQRkkmQAhvnqWBsKA,MPAonkleyUOeNEw3TEYiVA,nVl7nG2BO0y1fa7YktQ0Ug,uqZmakGk Oka6hwqVjO8uNA?mode=read&tenantId=32f56fc7-5f81-4e22-a95b-15da66513bef&webinarRing=gcc;

Meeting ID: 237 708 527 692; Passcode: 4kF5as.

Final Takeaways

Employers who use automated screening tools for hiring and have employees residing in New York City or advertise for job candidates residing in New York City are encouraged to make their voice and concerns heard by participating in the public hearing. Employers also should keep abreast of any developments that may occur between now and January 1, 2023, the law's effective date.

Footnotes

1. "Automated employment decision tool" means "any 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 that impact natural persons."

2. More specifically, the law says that the audit is to assess the tool's disparate impact on "persons of any component 1 category required to be reported by employers pursuant to subsection (c) of section 2000e-8 of title 42 of the United States code as specified in part 1602.7 of title 29 of the code of federal regulations." EEO-1 Component 1 data are used by the EEOC to investigate charges of employment discrimination against employers and to provide information about the employment status of minorities and women. The categories in a "component 1 category" include race/ethnicity and sex. Thus, the audit must assess whether the automated employment decision tool's screening results in a disproportionately negative/disparate impact on job applicants because of their race/ethnicity or sex.

3. "Distribution date" means the date the employer or employment agency began using a specific AEDT.

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