NYC Adopts Final Rule on Automated Employment Decision Tools and Delays Enforcement

As we reported in a prior alert, New York City enacted a law imposing restrictions on NYC employers who use automated employment decision tools (“AEDT”) that use machine learning, data analytics, and other artificial intelligence tools to make employment decisions. Last week, the NYC Department of Consumer and Worker Protection (“DCWP”) published final rules implementing the law. The Department also delayed enforcement of the law until July 5, 2023.

The law defines an AEDT as “any computational process, derived from machine learning, statistical modeling, data analytics, or artificial intelligence, that issues simplified output, including a score, classification, or recommendation, that is used to substantially assist or replace discretionary decision making for employment decisions that impact natural persons.” While the law was silent on the definition of “machine learning, statistical modeling, data analytics, or artificial intelligence,” the final rule explains that these items mean a “group of mathematical, computer-based techniques (i) that generate a prediction, meaning an expected outcome for an observation, such as an assessment of a candidate’s fit or likelihood of success, or that generate a classification, meaning an assignment of an observation to a group, such as categorizations based on skill sets or aptitude; and (ii) for which a computer at least in part identifies the inputs, the relative importance placed on those inputs, and, if applicable, other parameters for the models in order to improve the accuracy of the prediction or classification.”

While neither the law nor the final rule provides examples of what might be considered an AEDT, the final rule substantially narrows the definition of AEDT. A tool is not an AEDT unless, in using the tool to make an employment decision, the  employer is (1) relying solely on a simplified output from the tool (for instance, a score, tag, classification, ranking, etc.) with no other factors considered; (2) using a simplified output as one of a set of criteria where the simplified output is weighted more heavily than any other criterion in the set; or (3) using a simplified output to overrule conclusions derived from other factors including human decision-making.

Employers may not use an AEDT unless the AEDT has been the subject of a “bias audit” within the past year and the results of the bias audit are made publicly available on the employer’s website. The law defines a bias audit as an impartial evaluation by an independent auditor, including at least the testing of an AEDT to assess its impact on persons based on race, ethnicity, sex and intersectional categories. The final rule clarifies that the independent auditor cannot be the employer or the vendor providing the tool, or a party with a financial interest in the employer or the vendor. The final rule also describes the types of statistical analysis and data required for a bias audit.  

Before an employer can use an AEDT, and for six months after the AEDT’s most recent use, the employer must also make a summary of the bias audit publicly available on the employment section of its website in a clear and conspicuous manner. Employers can meet this requirement by providing an active hyperlink to a website containing the required information, so long as the link is clearly identified as a link to results of the bias audit. In addition to certain specific information required as part of the summary, employers must also provide on the employment section of their website in a clear and conspicuous manner: (1) information about its AEDT data retention policy, the type of data collected for the AEDT, and the source of the data, and (2) instructions for how to make a written request for such information. If an employer receives a written request for that information, they must provide it within thirty days.

Finally, the law imposes several notice obligations on employers who use an AEDT to evaluate residents of New York City for employment or promotion. Employers must notify each covered candidate or employee that: (1) an AEDT will be used in connection with the assessment or evaluation of the candidate or employee and how an individual can request an alternative selection process or reasonable accommodation; and (2) the job qualifications and characteristics that the AEDT will use to assess them.  Notably, the regulations do not require the employer to provide such an alternative selection process, though such a requirement may apply under federal, state, or local reasonable accommodation statutes. The final rule provides that employers can meet these notice obligations for job candidates in any of the following ways: (1) providing notice on the employment section of its website in a clear and conspicuous manner at least 10 business days before the use of the AEDT; (2) providing notice in a job positing at least 10 business days prior to the use of an AEDT; or (3) providing notice to candidates for employment via US mail or email at least 10 business days prior to the use of the AEDT. If an employer is using an AEDT to evaluate current employees, its notice requirements can be fulfilled by providing notice: (1) in a written policy or procedure to employees at least 10 business days prior to the use of the AEDT; (2) in a job posting at least 10 business days before use of an AEDT; or (3) via US mail or email at least 10 business days prior to the use of the AEDT. These notice requirements appear to be limited to residents of New York City; however, it is not always clear where an applicant resides, so employers may want to consider how to implement these notice requirements to ensure all appropriate individuals are reached.

While the law will not be enforced until July 5, 2023, employers who use (or are planning to implement) an AEDT should continue to prepare for compliance with these expanded requirements, including by evaluating whether any recruiting tools qualify as an AEDT and if so, making arrangements to conduct and publish a bias audit. If you have any questions regarding compliance with the new requirements, please contact Amanda M. Baker at abaker@fglawllc.com or Kate Townley at ktownley@fglawllc.com or any attorney at the Firm.

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