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A new law in New York City requires any employer using artificial intelligence-based recruitment software to first have the tool screen for racial or sexist prejudice against applicants, and major business groups are fighting back.
Local Law 144, which went into effect Wednesday, bans employers from using automated employment decision tools (AEDT) to select candidates until the company has had the tool analyzed for possible bias by an independent auditor and publicly releases the results.
The new law, passed in 2021, also requires that city-based employers who use machine learning or AI tools for hiring decisions send a notice to all New York City-based candidates informing job seekers that a AEDT was used.
New York City’s new law governing the use of AEDT hiring tools is believed to be the first citywide attempt to crack down on the use of AI in the employment process. (ANGELA WEISS/AFP via Getty Images / Getty Images)
The new regulations are being enforced by the New York City Department of Consumer and Labor Protection (DCWP), which states on its website that audits of AEDT tools must be conducted at least once a year and “[a]The assessment by an independent auditor must include, as a minimum, calculations of selection or assessment rates and the impact relationship between gender categories, race/ethnicity categories, and intersectional categories.
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Any company that goes bankrupt for violating the new law faces a fine of up to $500 for the first violation and up to $1,500 for each subsequent violation. The DCWP directs anyone wishing to make a complaint about a potential violation of the new AI recruitment tool regulations to visit the department’s website or call 311. Claims of discrimination related to AEDTs should be directed to the NYC Commission on Human Rights.
AEDTs are not new, but the advent of generative artificial intelligence tools has alerted regulators that the latest technology could carry biases that could violate anti-discrimination laws. (iStock / iStock)
AEDTs have been around for years and are used by companies and employment agencies to increase efficiency in the hiring process. But experts warn that their use can expose companies to liability for violating Title VII or other antidiscrimination laws if the products are found to be biased against a protected class.
The recent emergence and rapid adoption of generative AI tools like OpenAI’s ChatGPT have raised fears that the new tools could create greater risk in the hiring process, and NYC’s new law comes at a time when a number of federal agencies are investigating how technology is affecting the way employment decisions are made Action is being taken and efforts are being increased to ensure companies comply with federal laws.
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However, NYC’s Local Law 144 is believed to be a city’s first attempt to enforce AI-related regulations, and a Big Apple business group says it was a mistake.
“This is just another onerous top-down regulation that threatens to expose companies to frivolous lawsuits based on fabricated racism concerns,” Alfredo Ortiz, president and CEO of Job Creators Network, told FOX Business in a statement.
“Nobody wants racism or sexism in the hiring process, but analyzing automated hiring processes for racial or gender differences will lead to fabricated insights into business discrimination, when none have occurred,” Ortiz said. “The New York City Council should repeal such large government measures that restrict entrepreneurship to meaningfully help minorities improve their economic opportunities.”
New York City Council participates in the 2023 New York City Pride March on June 25, 2023 in New York City. The city passed new law this week that requires companies to conduct a bias check before using AI or machine learning tools when hiring employees… (Rob Kim/Getty Images / Getty Images)
The Society for Human Resource Management (SHRM) has also spoken out against Local Law 144 and the fines that employers face for potential violations.
“SHRM is committed to improving opportunity and equity in the hiring process, performance management and other areas of human resources — and that includes the use of new technologies,” the group told FOX Business in a statement in response to the new law. “We agree that AI needs guardrails; however, we do not support over-regulation at the expense of innovation and workforce optimization.”
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The New York City Council did not immediately respond to FOX Business’s request for comment on the new law and its potential implications.