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By Samantha Egge, Legal Intern and Rachel H. Khedouri, Esq

Update: On April 7, 2023, the Department of Consumer and Worker Protection issued its Final Rule clarifying employer’s obligations under Local Law 144 and announced that it was delaying enforcement of the new law until July 5, 2023. The full text of the Final Rule is available HERE.

In response to concerns about inherent biases in Artificial Intelligence (“AI”) and similar technology as applied to employment decisions, the New York City Council recently enacted an ordinance governing the use of such tools by employers and employment agencies. The full text of NYC Local Law 144 is available HERE

Effective January 1, 2023, Local Law 144 amends NYC’s administrative code to restrict the use of automated decision-making tools, including any “computational process . . . that is used to substantially assist or replace discretionary decision making.” Examples of these tools include resume screening software, automated scoring of applicant ability tests, and performance evaluation metrics. The law does not apply to tools that do not automate, supplement, or assist discretionary decision making, such as firewalls, junk e-mail filters, antivirus software, spreadsheets, databases, and calculator applications.

Under the law, use of AI and similar software is permissible in NYC only if the employer:

  1. Conducts an impartial bias audit via an independent auditor to assess the tool’s disparate impact based on protected characteristics (such as race, color, religion, sex, and national origin), within 1 year prior to use and makes the results publicly available on its website; and
  2. Gives notice to NYC-resident candidates for hire or promotion 10 days prior to use. Notice must include the use of the tool, the specific job qualifications and characteristics being assessed, and allow a candidate the opportunity to request accommodation or an alternative selection process. Employers must also provide information on the data collected for the tool on their website or within 30 days of a candidate’s or employee’s written request.

Violating the new law can become quite costly. Employers or agencies that use a tool that has not been properly validated or that fail to provide required notice are subject to civil penalties of up to $500 for the first violation and up to $1,500 for each subsequent violation each day that a tool is used in violation of the law and for each impacted applicant or employee who is not properly notified.

If you have any questions relating to this new measure or would like assistance reviewing your company’s use of AI tools for compliance in advance of the January 1, 2023 effective date, please reach out to the NFC Attorney with whom you typically work or call us at 973.665.9100.


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