NYC Releases FAQs on Automated Employment Decision Law

Local Law 144, New York City’s law governing the use of automated employment decision tools (“AEDTs”), became effective on July 5^th, approximately six months after its original effective date and following several rounds of hearings on its proposed and Final Rule.  Just days prior, the New York City Department of Consumer and Worker Protection (“DCWP”) released a set of Frequently Asked Questions (“FAQs”) to provide guidance for covered employers regarding some of the many open questions that have been raised throughout the months since its regulations were first issued.  While the FAQs provide some clarity, many questions remain.

Remote Positions

The FAQs clarify that Local Law 144 applies to AEDTs for jobs where:

• The job location is an office in NYC, at least part time;
• The job is fully remote but the location associated with it is an office in NYC; or
• The location of the employment agency using the AEDT is NYC.

At a roundtable held in May 2023, DCWP suggested that a remote position for an employer with office in multiple locations, including NYC, would require a “fact specific analysis” based on several factors to determine whether the law applied.  Although the FAQs seem to depart slightly from this earlier guidance, they do not clarify how to determine whether a remote position is “associated with” an office in NYC.

AEDTs Used to Find Potential Candidates

Local Law 144 applies only to AEDTs used to assess candidates for hiring or promotion once they have applied for a specific position.  This means that AEDTs used prior to this, for example, to scan a resume bank, conduct outreach to potential candidates, or invite applications, are not covered under the law, and the bias audit and notice requirements do not apply. 

Notably, however, once a candidate has applied for a specific position in the manner required by the employer or employment agency, the use of an AEDT to screen candidates at any point in the hiring or promotion process would be subject to the law, as “employment decision” is defined broadly and is not limited to the final hiring or promotion decision.   

Data Requirements

According to the FAQs, an employer may not impute demographic information to applicants or use algorithmic software to infer it for use as historical data.  If there is insufficient historical data to conduct a statistically significant bias audit, the employer may use either test data or historical data of other employers.  The FAQs state that DCWP has not set a specific requirement for statistical significance and indicate that an employer may rely on an independent auditor to determine whether there is sufficient historical data available and whether test data should be used.

DCWP has not set requirements for either test or historical data.  But the FAQs emphasize the requirement that the summary of the results of a bias audit include the source and explanation of the data used to conduct that audit, which would include any limitations on the type or scope of the data used, as well as how test data was developed.  The FAQs also clarify that where a bias audit is based on the historical data of multiple employers, there is no requirement that such data be position-specific, i.e. related to use of the AEDT for hiring or promoting for the same type of position.  This approach differs from that of the Uniform Guidelines on Employee Selection Procedures, which allow an employer to use selection procedures based on validity studies conducted by other sources only if the incumbents in the job(s) on which the validity study was conducted “perform substantially the same major work behaviors” as the job on which the selection procedure is to be used.

Notice to Employees and Job Candidates

Neither Local Law 144 nor its implementing regulations require specific language to be used in the notice to employees and job candidates.  The notice need only disclose that an AEDT will be used and the job qualifications or characteristics that the AEDT will assess.  Notably, however, the FAQs clarify that once notice has been posted on an employer’s website, that employer may begin using the AEDT ten business days later, regardless of when a specific job was posted, meaning that the notice need not be position-specific.  Similarly, notice provided in a written policy or procedure to candidates for promotion need not be position specific. 

Bias Audit Responsibility

The FAQs expressly state that it is the employer/employment agency, not the vendor, that is responsible for ensuring that a bias audit is conducted before using the AEDT.  A vendor is permitted, however, to have an independent auditor conduct a bias audit of its tool or to coordinate the collection of data to use to conduct a bias audit.

Enforcement and Discrimination Claims

Although an employer is required to ensure that a bias audit is conducted and to provide notice of the audit, there is no requirement that an employer stop using an AEDT if the results of a bias audit indicate a disparate impact.  However, such results, which would not only be provided to candidates but would also need to be published on the employer’s website, could potentially open employers up to discrimination lawsuits.

DCWP will enforce the prohibition on the use of AEDTs without a bias audit and required notices, and will refer any claims of discrimination to the NYC Commission on Human Rights.

Conclusion

Now that the law has gone into effect, covered employers who have not yet obtained a bias audit should not use any AEDTs in their hiring or promotion decisions until such audit has been conducted and notice has been provided consistent with the requirements of Local Law 144.  Employers who have obtained a bias audit indicating a disparate impact are advised to consult an attorney regarding the potential consequences of the continued use of such tools. 

Crowell & Moring attorneys are available to assist in addressing any questions regarding Local Law 144.