Independent audits for bias must be conducted on all automated employment decision tools and disclosures must be provided to internal and external job candidates

New York City passed the first-in-the-country law that impacts employers and employment agencies that recruit or promote within the city. The new law, N.Y.C. Admin. Code § 20-870 et seq., requires employers and employment agencies that use “automated employment decision tools” when hiring in the city to: (1) conduct independent audits of the tools for bias and (2) provide disclosures to candidates and employees at least 10 business days prior to using an automated employment decision tool.

Effective January 1, 2023, the law prohibits employers and employment agencies from using “automated employment decision tools” for screening purposes unless the tools have been subject to independent bias audits conducted no more than one year prior to the use of the tool. The results of the audits must be summarized and posted publicly on the employers’ or employment agencies’ websites. Each candidate or employee screened for a position must be provided with a disclosure regarding the use of the tools.

Definitions

Automated employment decision tools are defined 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.” It does not include a tool that “does not automate, support, substantially assist or replace discretionary decision-making processes and that does not materially impact natural persons, including, but not limited to, a junk email filter, firewall, antivirus software, calculator, spreadsheet, database, data set, or other compilation of data.”

Employment decisions mean screening “candidates for employment or employees for promotion within the City.”

A bias audit is defined as an impartial evaluation by an independent auditor who, at a minimum, assesses the tool’s disparate impact on persons of any component 1 category that employers must report to the EEOC pursuant to 42 U.S.C. 2000e-8(c).

Penalties and Enforcement

Violations may be subject to civil fines of not more than $500 for the first violation and each additional violation occurring on the same day as the first violation, and not less than $500 nor more than $1,500 for each subsequent violation. Each day that the tool is used in violation shall give rise to a separate violation.

The corporate counsel or their designated representative may initiate in any court of competent jurisdiction any action or proceeding that may be appropriate or necessary for the correction of any violation.

OutSolve’s Take

The first step for employers hiring or promoting in New York City is to contact their corporate counsel to discuss the options to conduct an analysis of their systems and processes. Considering the broad definition of an automated employment decision tool, employers should conduct a review of their screening and hiring processes, software, and tools to determine if they would be required to conduct a bias audit and provide a disclosure to internal and external candidates. It would be prudent to contact software vendors to address compliance with these new legal requirements. At the direction of counsel, OutSolve could support the effort by providing a step-based adverse impact analysis and sharing the results under privilege. Counsel can contact OutSolve directly at 888-414-2410 or by email at info@outsolve.com for further assistance.