Organizational Wellness

New York City’s “AI in Hiring Law” Enforcement Begins July 5, 2023

Jun 27, 2023
Last Updated Jun 14, 2024

Beginning July 5, 2023, a groundbreaking law will take effect in New York City that will change the way employers screen, select, and hire new talent, as well as how they promote current employees. The law is called "The Artificial Intelligence in Hiring Law" (Local Law 144 of 2021 or "NYC 144"). It is commonly referred to as the “AI Law,” and it is designed to ensure fair hiring and promoting practices for employers in New York City. 

Whether you're an HR leader or a job seeker interested in hiring trends, this legislation is worth knowing about. As it stands today, New York City-based companies will now be required to remain compliant with legal AI standards or risk facing significant fines and penalties.

So, what does the law actually mean for recruiters and HR leaders? Does the AI law apply to your business? How can businesses make sure they remain compliant? Will AI laws continue to expand across the US? Here's the basic information you need to know!


What is NYC's "AI In Hiring Law"?

New York City's "AI in Hiring Law" is one of the nation's first pieces of legislation aimed at combatting bias and discrimination by companies that use artificial intelligence (AI) during their hiring or promotion processes. Essentially, the law requires employers based in New York City to disclose their use of automated employment decision tools (AEDTs) if using them to screen NYC-based job applicants or to assess the performance of current NYC-based employees.

But that's not all. Employers are also required to provide NYC-based applicants clear and concise explanations of their AEDT-assisted screening processes, and provide instructions for candidates and employees to request an alternate screening process. Violating the law can result in penalties between $500-$,1500 per violation, per day, with the potential for additional lawsuits from candidates who believe they were unfairly discriminated against. 

If that sounds like a lot, it is. But don't worry, a full break down what all this means is coming up next.

What is an Automated Employment Decision Tool (AEDT)?

NYC's "AI in Hiring" law defines an automated employment decision tool (AEDT) as "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." 

In simpler terms, an AEDT is essentially a machine or software that uses algorithms and automation to make decisions about hiring, promotion, and other employment-related matters.

You may be using an AEDT in your business already. A few common examples of AEDTs include some background check tools, resume scanners, and programs that score or rank candidates to determine if they are a "culture fit". 

Who is Affected by the AI Law?

Currently, NYC's AI law affects all employers based in New York City who use AEDTs to screen applicants or assess current employees for hiring and promotion decisions. This includes employers of all sizes—from small startups to large corporations—as well as staffing agencies that work with NYC-based candidates.

It's also important to note that, currently, NYC-based employers are only obligated to notify and disclose information about their use of AEDTs to employees and candidates who reside in NYC. Additionally, it's currently unclear if the law applies to companies whose headquarters are located outside of New York City, but still recruit NYC-based candidates or employ people based in NYC. How these open questions are answered could lead to additional hiring processes for HR leaders working with candidates and employees in the region.

How should employers prepare for NYC's AI Law?

If you are an employer based in New York City, you will may need to ensure your hiring and promotion practices remain compliant with NYC's AI law. Here's how to get started:

  1. Identify any AEDTs used in your employment decision processes. The first step is to identify any automated employment decision tools that you currently use in your hiring or promotion processes. Create a written list of those tools. Be sure to consult legal counsel, HR leaders, and other company leaders to make sure you capture all the tools being used across the company. Once you have a full list, continue to work with leaders and legal counsel to determine exactly how and why the AEDTs are being used (i.e. for background checks, resume screening, candidate scoring and testing, etc.). This will help you determine if they are subject to the law's mandatory bias audit. 
  2. Conduct an independent bias audit. It's now time to perform an independent bias audit to determine whether there is bias in the AEDTs you use. NYC's AI law requires you to work with an independent third-party vendor or consultant to conduct the audit. You may be asking..."how are they going to detect if bias exists in the tool?" That's a great question! Most audits will determine how things like race and gender impact the tools outputs by calculating something called an "impact ratio". An impact ratio basically analyzes the selection rate the tool has towards a particular group compared to the group with the highest selection rate. A complete bias audit can usually take anywhere from a few weeks to a few months. It's important to note that the law requires bias audits on an annual basis, so be prepared to establish a scalable process for yearly bias audits.
  3. Publish a summary of the results. Once the audit is complete, companies must publish a summary of results online and provide an accessible version to applicants and employees. The law requires the results to be posted on a careers or jobs page on your website. You can post the results on an independent page and link to the results from your careers or jobs page, however, you must make sure the text you use demonstrates that it clearly goes to the results of the bias audit when clicked. 
  4. Provide notices to affected candidates and employees. The last step is to provide a notice to affected employees and candidates. This notice must include an explanation of the decision-making process, how the AEDT was used in their assessment or evaluation of the job qualifications or performance assessment, an explanation of the types of data collected during the process, as well as any potential rights that the candidate or employee may have if they believe they were discriminated against. You can either provide this notice in writing or electronically (such as via email). For job candidates, you can also post this notice directly on the job posting. Employers must also provide instructions for how candidates and employees can request an alternative selection process.

The Use of AI in HR

While AI tools can be incredibly useful for employers, they can also introduce unintended bias and discrimination if not used properly. New York City's new AI law aims to set the standard for ethical AI use in hiring and promoting practices, which could influence legislation in other parts of the U.S and the world. The United States Federal Government is already taking steps to discover the risks associated with AI in terms of privacy, misinformation, and discrimination. Only time will tell how future regulations will unfold.

For employers, the expanded use of AI in HR serves as an important reminder to ensure their hiring practices are ethical, transparent, and compliant with all relevant laws and regulations. While a recent survey showed 92% of HR Leaders plan to increase their use of AI in at least one area of HR over the next 12 to 18 months, 71% of U.S. adults say they would oppose employers using AI for making a final hiring decision.

Inclusion at Every Stage

It’s important for companies to adhere to all regulations so hiring and promotions processes can be fair and balanced. But being compliant is about more than avoiding penalties — more importantly, meeting these standards is about striving for an inclusive workplace where every employee is treated the same. 

Wellhub provides a comprehensive wellbeing program that supports employees equally, ensuring everyone has access to affordable and meaningful wellness experiences. Whether all of your employees are in one city or spread across the country, whether they're looking to improve their flexibility or put on muscle, Wellhub can advance their wellness journey.

Talk with a Wellbeing Specialist today about how our program can help you provide an inclusive employee experience!

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Wellhub Editorial Team

The Wellhub Editorial Team empowers HR leaders to support worker wellbeing. Our original research, trend analyses, and helpful how-tos provide the tools they need to improve workforce wellness in today's fast-shifting professional landscape.


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