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Aug 9, 2022

On November 10, 2021, New York’s City Council enacted Int. No. 1894-A – legislation, (effective from 1st January 2023), that requires employers to conduct a ‘bias audit’ on artificial intelligence (AI) technology used to review, select, rank or eliminate candidates for employment or promotion.

The audit must be performed by an independent auditor and its results must be published on the employer’s website before the employer implements the AI programs

For those who may not have heard of it, this is a significant new law. Currently, approximately 83% of U.S. employers use some form of AI in their hiring processes. Most use them solely it to efficiently find the right candidates for their vacancies. But what this new legislation means is that AI programs not properly constructed and evaluated, can now be seen as programs that perpetuate unlawful discrimination – discrimination which is also punishable by fines.

Non-complying employers will be subject to a civil penalty of $500 for the first violation and $1,500 for each subsequent violation. On top of this, each day the AI tool is used it is considered a separate violation, and each candidate the employer fails to notify is similarly a separate violation.

Potential Title VII Violations

Even though employers may have no intention of discriminating against job applicants, unaudited AI programs open them up to potential Title VII discrimination claims. Title VII prohibits not only overt employment discrimination, but also policies and practices “that are fair in form, but discriminatory in operation.”

Employers are susceptible to a Title VII lawsuit if they implement a policy of using an AI program to cull through applications that, while neutral on its face, produced an adverse effect on the basis of a protected characteristic, such as race or gender.

The employer would then have to establish that the program did not have a disparate impact or concede that while the program had a disparate impact, it was “job related for the position in question and consistent with business necessity.” Even if employers can meet this job-related burden, they may have spent more in legal fees than if they had conducted the bias audit that New York City now requires.

Class action potential too

The use of AI programs could also expose an employer to class action litigation. By having all candidates’ applications run through a single AI program, employers are creating a situation where it is making employment decisions about its entire applicant pool based on a single selection device: the AI algorithm.

This use of a single selection device may have the practical consequence of exposing AI-using employers to employment discrimination claims and employment discrimination class actions that previously were limited to situations where employers employed standardized employment tests as the single selection device.

New York legislation filling federal government void

With the real potential for discrimination, one might have expected that the federal government would have stepped in by now to regulate the use of AI programs.

To date, though, the federal government has not enacted any laws that directly address the use of AI in hiring practices.

Senators Corey Booker, Elizabeth Warren, and several other senators recently called on The U.S. Equal Employment Opportunity Commission (EEOC), to proactively investigate and audit AI programs and their effects on protected classes. In October 2021, the EEOC announced it had commissioned an investigation into AI programs used in hiring and other employment decisions. In an effort to oversee and regulate employers’ use of AI programs, the EEOC intends to “launch a series of listening sessions with key stakeholders about algorithmic tools and their employment ramifications.” But so far, the initiative has not published any of its findings.

What should you do?

With the influx of AI programs in hiring, and the introduction of new local legislation, and potentially federal legislation, it is important employers continue to stay abreast of these changes in the law.

While all human resources and recruiting employees should continue to play an active role in reviewing their companies’ hiring platforms, it is just as important that the employer hires reputable outside auditors and employment litigation attorneys to help guide them through this AI maze. Employers risk multi-million dollar lawsuits without experts at the table.

The hope is that in the near future, AI programs’ discriminatory processes will be eliminated, or significantly reduced, with the EEOC and New York City examining the programs.


Shauneida Navarretea

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