The New York City Council recently enacted an ordinance banning artificial intelligence (“AI”) in employment decisions unless the technology has been subject to an independent bias audit within a year of use.

Many employers have been using AI in employment decisions for years without regulation. This technology can range from algorithms finding ideal candidates to software used to asses a candidate’s performance during screening interviews. While AI tools promote efficiency, reduce costs, and can help employers make informed decisions, technology can run afoul of discrimination laws by reinforcing bias or screening out candidates of protected classes.

The law, which takes effect on January 1, 2023, bans such unregulated practices in New York City by requiring employers to obtain an independent audit of their automated tools within a year of use. Employers will be required to make the results of the audit publicly available on their websites.

Additionally, employers must notify candidates who reside in New York City within 10 days of using automated tools and detail the job qualifications and characteristics that the tool will use to assess the candidate. Employers that do not comply will be subject to a $500 fine for the first violation, and a $1,500 fine for each subsequent violation. The penalty will then be multiplied by each day that the issue is unresolved.  These penalties can add up quickly, making it crucial for employers to review their automated employment tools before the law takes effect.

There are unanswered questions that the City needs to address for a smooth implementation of this law. The law does not specify the independent people or agencies qualified to perform a “bias audit,” although many larger employers have been validating similar types of pre-employment tools prior to use for years.

Although the City’s Office of the Corporation Counsel is authorized to bring a lawsuit to address violations of the new law, private lawsuits by aggrieved parties are not expressly permitted. The law is silent about whether class action lawsuits could be filed, it is likely that the new law would promote the filing of such lawsuits to the extent that the AI tools would be used in accordance with uniform policies and practices.

While NYC has not issued guidance at this time, it is likely that more direction will be issued before the law takes effect in January 2023. We will keep you informed of further developments.

For more information, contact Sal Gangemi.