NYC Employers Take Note: Nov. 4 Public Hearing Set for NYC Law Rules Restricting Automated Employment Tools | Schnader Harrison Segal & Lewis LLP

Context of the law

Effective January 1, 2023, New York City will prohibit employers and placement agencies from using automated employment decision tools1 for New York Employment Decision, unless the tools have undergone a bias audit within the year prior to the use of the tool, information about that audit is made public at a website with a summary of the results of the bias audit and the date of distribution, and some of the opinions were provided. The purpose of the audit is to assess the tool’s disparate impact on women and minorities.2 (Local Law 144 of 2021; “IA Law”).

Specifically, the AI ​​Act requires all employers and placement agencies that use an automated employment decision tool to screen an employee or candidate who has applied for a position to inform that employee or candidate – if they reside in New York – that an automated job decision tool will be used to assess their candidacy for hire or promotion, as well as the qualifications and job characteristics that will be used to assess the candidate or the 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 that data, and the data retention policy of the employer or employment agency is not not disclosed on the employer’s or employment agency’s website, they must be made available to an applicant or employee within 30 days of a written request (unless prohibited by law other).

Penalties

Employers who violate this law are subject to a civil penalty of up to $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 the illegal tool is used is a separate violation. No ceiling or maximum penalty is indicated in the law.

Legal recourse

The law provides that the New York City Company’s attorney or representative may file a lawsuit to correct any violation of law, enforce compliance, and seek other remedies. However, the law also states that it does not preclude any private right of action by an aggrieved candidate or employee or proceedings by the New York City Commission on Human Rights to enforce the law on New York City Human Rights.

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 said its proposed rules would clarify the obligations of employers and employment agencies under the law.

What are the proposed rules?

Specifically, DCWPs suggested rules:

(1) define various terms;

(2) explain the bias audit requirements, including that a bias check of an Automated Employment Decision Tool (“AEDT”) must: (a) calculate the selection rate for each race/ethnicity and sex category which must be reported to the United States Equal Employment Opportunity Commission (“EEOC”) pursuant to the EEO Component 1 report, (b) compare these selection rates to the most selected category to determine a impact ratio for each category, and (c) when the tool categorizes individuals into groups, perform selection rate and impact ratio calculations for each of these classifications;

(3) clarify the requirements for publishing the 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 “clear and conspicuous manner”, either by an active hyperlink to another website showing a summary of the results and the date of release3 ) and record keeping requirements; and

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

While the law provides that job applicants have the right to request an alternative selection process or accommodation, the proposed rules state that employers are not required to offer an alternative selection process. The proposed rules are silent on the definitions of “alternative selection process” or “accommodation”, how these terms will be implemented, the deadline for an employer to respond to a candidate’s request or on any process required to notify the requester whether the request has been granted or denied.

Submit comments on proposed rules

Employers who intend to provide public comments must do so by 11:59 p.m. November 4, 2022, by: (1) submitting comments to the DCWP via the NYC Rules website at http://rules.cityofnewyork.us; (2) sending comments via email to [email protected]; and/or (3) comment on the proposed rules at the public hearing by registering in advance to speak at the November 4 public hearing.

Public audience

Friday, November 4, 2022 at 11 o’clockThe New York City Department of Consumer and Worker Protection will hold a public hearing that will be accessible by telephone and Zoom video conference, originally scheduled for October 24.

To participate in the November 4 public hearing by telephone, individuals can dial 646-893-7101; Meeting ID: 237708527692; Access code: 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%20%20Oka6hwqVjO8uNA?mode=read&tenantId=32f56fc7 -5f81-4e22-a95b-15da66513bef&webinarRing=gcc

Meeting ID: 237708527692; Access code: 4kF5as.

Last takeaways

Employers who use automated screening tools for hiring and have New York-resident employees or who advertise for New York-resident candidates are encouraged to raise their voices and concerns by participating in the public audience. Employers should also keep abreast of any developments that may arise between now and January 1, 2023, when the law comes into force.

1 “Automated Employment Decision Tool” means “any computational process, derived from machine learning, statistical modeling, data analytics, or artificial intelligence, that generates a simplified output, including a score , classification or recommendation, which is used to aid in or substantially replace decision-making in making employment decisions that impact individuals.

2 Specifically, the law states that the audit must assess the tool’s disparate impact on “persons in any category of component 1 to be reported by employers pursuant to paragraph (c) of section 2000e-8 of the 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 is used by the EEOC to investigate allegations of discrimination at the against employers and to provide information on the employment status of minorities and women. Categories of a “component 1 category” include race/ethnicity and gender. Thus, the audit should assess whether the selection of the automated employment decision tool results in a disproportionate negative/disparate impact on job applicants due to their race/ethnicity or gender.

3 “Distribution Date” means the date on which the employer or employment agency began using a specific AEDT.

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