July 7, 2023
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On June 30, 2023, the New York City Department of Consumer and Worker Protection (“DCWP”) issued Frequently Asked Questions (“FAQ”).[1] Regarding Ordinance 144 of the City of New York,[2] It came into effect on July 5, 2023.
Local Law 144 prohibits employers and employment agencies from using an Automated Employment Decision Tool (“AEDT”) in hiring and promotion decisions unless an annual bias audit is conducted by an “independent auditor.” The law imposes posting and notification requirements for New York City applicants and employees regarding the use of AEDT. The FAQs provide insight into how DCWP approaches enforcement of Local Rule 144, including the penalty schedule, which imposes fines ranging from $375 to $1,500 for each nondiscrimination audit, notice, and posting requirement.[3]
As noted at the top level below, the FAQs provide some helpful guidance to covered employers, but questions remain regarding the statute’s scope and audit requirements.
1. NYC office space is key.
The FAQs clarify that Local Rule 144 applies only to employers with physical offices in New York City that, if the location is related to (i) jobs using AEDT at least part-time or (ii) remote positions located in New York City. [such remote position]” is an office in New York City.
2. Covered employment decisions shall not be final.
The DCPP has previously emphasized at roundtable events in May 2023 that Environment Act 144 covers employment decisions “at any point in the process”. Otherwise, the analysis of the applicability of Local Rule 144 is not limited to the final employment decision.[4]
Frequently asked questions echo this position and emphasize that the Act defines “employment decisions” to include screening for employment or status. However, frequently asked questions to clarify or send invitations Capacity Candidates for job or promotion fall outside the scope of the Act.
3. Responsibility for compliance lies with employers, not suppliers.
The FAQ states that it is an AEDT provider. is not Responsible for conducting bias audits of equipment. Instead, in DCWP’s view, covered employers and employment agencies are responsible for complying with Local Rule 144’s nondiscrimination audit requirements.
4. Demographics cannot be estimated.
FAQs clearly state that employers and employment agencies can is not Infer or assume information about an applicant’s demographics. This differs from areas of law such as the EEO-1 Part 1 report, which allows bystander identification to determine an employee’s race or ethnicity.[5]
Accordingly, bias audits can only be conducted using historical or test data, and cannot be conducted using algorithmic or otherwise estimated demographic data.
5. No threshold was set for statistical significance.
DCWP chose not to develop specific criteria for determining statistical significance, thereby leaving the decision to an independent auditor. If test data is used in lieu of historical data and the auditor determines that the historical data is not statistically significant, the public summary of the bias audit results should explain this decision.
6. No special test data requirements.
DCWP previously stated that the Local Rule 144 bias audit requirement provides flexibility regarding what information is used and by whom.example(the seller or the employer) may provide information to an independent auditor.[6] Frequently asked questions suggest that DCWP has not set standards for test data to “develop best practices in this rapidly evolving field.”
Despite this apparent variability and flux, the FAQ states that a bias audit summary should include an explanation of the source of the data and the data used. For example, if the test data is limited to a specific region or time period, a public summary of why and/or how it is defined is expected.
7. Discrimination Auditing should not be limited to location.
Employers hiring for various positions May (a) when using AEDT for the first time or (b) relying on biased audits based on the historical data of multiple employers providing historical data to an independent auditor on the use of AEDT. To that end, the FAQ states that employers who submit historical data for discrimination audits should use the AEDT to hire or promote for a similar position. Frequently asked questions therefore suggest that data used for bias audits can be aggregated from different positions—although the appropriateness or prudence of doing so varies from case to case.
8. Advertisement should not be location specific.
A notice posted to job applicants on the employment section of an employer’s website or in a written policy or procedure for candidates seeking promotion. is not Identify its location. Therefore, it seems that the questions asked may be classified as a description of the job criteria and characteristics assessed by the ADT.
9. Claims of discrimination shall be referred to the City’s Human Rights Commission.
The FAQ states that claims of discrimination involving AEDTs sent to DCWP are forwarded directly to the New York City Commission on Human Rights. DCWP will only enforce the Environmental Law 144 prohibition on the use of AEDT with impartial audits and the required notice and posting.
10. Many questions and ambiguities remain.
While promising to address many outstanding questions raised during DCWP roundtable events, the FAQs leave several open questions.
For example, there is still no explanation regarding the employment agency’s improper interpretation of the statute.[7] The final rules implementing Local Law 144 define an “employment agency” as “any person who provides and directly or indirectly represents for payment, career guidance, or counseling services” such as arranging interviews or performing any of the listed activities. Knowledge of job openings or positions not available from other sources with reasonable effort.[8] Because Local Law 144 is limited to job applicants (not prospective applicants), it is not clear how a definition focused on job agencies focusing on attracting or assisting applicants can be reconciled with the statute’s narrow scope.
The FAQs state that test data can be used to conduct bias audits if demographic information is not available or collected, but it is not clear (however) whether covered employers can artificially generate test data to conduct bias audits, especially from the FAQs. State that demographic data should not be assumed.
Finally, as the FAQ states, a remote location that is “connected” to a New York City office is within the scope of the statute, but DCWP does not define or explain how a remote location is “connected” to a New York City office. For example, it is not clear whether a remote employee reports to a manager in New York City, has to travel to the New York City office occasionally, or is “unionized” if their wages are paid from the employer’s New York City office. .
Summary
To date, New York City’s Local Law 144 is the most extensive effort in the United States to use automated decision-making tools in employment. The impact will no doubt be closely watched (and scrutinized) by legal analysts and other states and cities. Since the law’s passage and the subsequent legislative process, employers in New York City have struggled with a variety of questions about the law’s scope and requirements. FAQs are helpful in answering some of these questions. But many remain. So, as of July 5th, employers are faced with the frustrating situation of trying to comply with Environment Act 144 without clear and comprehensive guidance.
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[1] DCWP, Automated Hiring Decision Tools: Frequently Asked Questions (June 2023) https://www.nyc.gov/assets/dca/downloads/pdf/about/DCWP-AEDT-FAQ.pdf.
[2] NYC Int 1894-2020, Local Law 144 (enacted December 11, 2021); https://legistar.council.nyc.gov/LegislationDetail.aspx?ID=4344524&GUID=B051915D-A9AC-451E-81F8-6596032FA3F9.
[3] RCNY, Titus 6, ch. 6, § 6-81, Automated employment decision tools penalty program (Effective August 5, 2022) https://codelibrary.amlegal.com/codes/newyorkcity/latest/NYCrules/0-0-0-134007.
[4] DCWP, Local Law 144 2021 Automated Employment Decision Tool Roundtable with Business Attorneys/Recruiters (May 2023) https://www.nyc.gov/assets/dca/downloads/pdf/about/DCWP-AEDT-Educational-Roundtable-with-Business-Advocates-Employers.pdf.
[5] US EEOC, 2021 EEO-1 Part 1 Frequently Asked Questions (Frequently Asked Questions); https://www.eeocdata.org/pdfs/2021_EEO_1_Component_1_FAQs.pdf.
[6] ID
[7] look out Harris Mufson, Danielle Moss, and Emily Lam; 10 Ways NYC AI Discrimination Laws Could Affect EmployersLaw360 (Apr. 19, 2023) (discussing definition of “employment agency” in final regulations implementing Local Rule 144).
[8] DCWP, Notice of adoption of the final rule, https://rules.cityofnewyork.us/wp-content/uploads/2023/04/DCWP-NOA-for-Use-of-Automated-Employment-Decisionmaking-Tools-2.pdf.
The following Gibson Forest attorneys assisted in the preparation of this client update: Jason Schwartz, Harris Mufson, Daniel Moss and Emily Lam.
The attorneys at Gibson Dunn are available to assist you with any questions you may have regarding these developments. Please contact a Gibson Dunn attorney you often work with, any member of the firm’s Labor and Employment practice group, or the following practice leaders and partners.
Harris M. Mufson – New York (+1 212-351-3805, [email protected])
Daniel J. Moss – New York (+1 212-351-6338, [email protected])
Emily M. Lamm – Washington, DC (+1 202-955-8255, [email protected])
Jason C. Schwartz – Co-Chair, Labor and Employment Group, Washington, DC
(+1 202-955-8242, [email protected])
Catherine VA Smith – Co-Chair, Labor and Employment Group, Los Angeles
(+1 213-229-7107, [email protected])
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Disclaimer: The enclosed materials are for general information purposes only and are not intended as legal advice. Please note, previous results do not guarantee the same result.
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