Two business days before the start of enforcement of NYC Local Law 144 of 2021, the first-of-its kind law regulating the use of AEDTs (Automated Employment Decision Tools), the New York City Department of Consumer and Worker Protection (DCWP) released a set of Frequently Asked Questions (FAQs).  These FAQs follow the codification of the law in December 2021; the release and revision of regulations in April, September, and December 2022; the adoption of further-revised regulations in April 2023; the deferral of enforcement to July 5, 2023; and a set of “educational roundtables” in late May, 2023.  At each step, the DCWP has materially refined the interpretation of the law. These FAQs, which emerge from the recent roundtables, are no exception, yielding one valuable clarification and one significant new concern.

Using an AEDT to Scan Résumé Banks or Invite Applications

FAQ I.6 states, unequivocally, that the use of an AEDT to fill a particular position is within scope only when the AEDT is applied to those who have submitted an application for that position:

6. Do the Law’s requirements apply if an employer or employment agency uses an AEDT to scan a resume bank, conduct outreach to potential candidates, or invite applications?

No. The requirements apply to AEDT use to assess candidates for hiring or promotion only.  A candidate for employment is a person who has applied for a specific position by submitting the necessary information or items in the format required by the employer or employment agency.

If AEDT use is to assess someone who is not an employee being considered for promotion and who has not applied for a specific position for employment, the bias audit and notice requirements do not apply.

This answer establishes that using an AEDT to search through an existing database of non-employee résumés or other collection of potential-applicant data, and/or merely encouraging those identified as prime candidates to apply for the position at hand, does not activate the requirements of the law.

Geographic Scope of Law for Employment Agencies vs. Employers

FAQ I.4 muddies the requirements for employment agencies, specifically:

4. What are the Law’s requirements and how do they apply to an AEDT used “in the city”?

The Law applies only to employers and employment agencies that use an AEDT “in the city.” This means:

• The job location is an office in NYC, at least part time. OR

• The job is fully remote but the location associated with it is an office in NYC. OR

• The location of the employment agency using the AEDT is NYC or, if the location of the employment agency is outside NYC, one of the bullets above is true.

The good news, first: If you are an employer, then the geographic analysis is simple, consistent with prior interpretations of the law and regulations, and driven by the location of the job, not that of the employer.  If the job is performed at an office or other corporate location outside NYC, the law does not apply.  If the job is performed at an assigned corporate location in NYC (even in partial or hybrid manner), then the law applies.  And if the job is performed 100% outside corporate work locations (e.g., in work-from-home set-ups), then the law does not apply unless the person is attached to an NYC location of the employer.

Now the bad news: This division of geographic scope could just as easily apply to employment agencies, but the third bullet point above muddies the waters.  Read literally, it suggests that the law applies to all jobs—even jobs performed fully outside NYC—if the hiring is done by an employment agency located in NYC.  We expect that such is not the intent of the DCWP, and that the agency intends to regulate agency-based hiring only where the positions being hired for are (at least partially) located in NYC or are fully remote but attached to an NYC brick-and-mortar office.  If the DCWP issues any additional clarification on this point, we will provide an update.

Complaints and Other New Details within the FAQs

Lastly, the FAQs flesh out or confirm a few other aspects of the law.

• FAQ II.1 notes that the law stops short of requiring corporate analysis and response to the bias audit. The bias audit results are not intended to spur any specific subsequent actions on the part of the business.
• FAQ III.3 reiterates a concern first stated during the May 2023 roundtables, that businesses might strategically exclude data from certain time periods or geographies to somehow improve the results of a bias audit.  To counter this concern, the DCWP states that if an audit data set is “limited in any way, including to a specific region or time period,” then the audit must “explain why.”
• FAQ III.4 confirms that a bias audit need not be specific to a job or job class.  Rather, a bias audit spanning multiple types of positions suffices.
• FAQs III.5 and III.7 indicate that if there is a gap or insufficiency in demographic data for candidates, businesses should rely on their independent auditors for advice on whether synthetic test data should be used for the bias audit instead.
• FAQs VII.1 and VII.2, taken together, encourage reporting of “suspected violations” of Local Law 144’s audit and notice requirements to the DCWP, but make plain that actual “discrimination complaints” will be referred to the NYC Commission on Human Rights.

Conclusion

As the tortuous path to enforcement of this law illustrates, regulating AI-driven employment activity is neither straightforward nor easily done in the abstract.  Instead, much of the nuance to this and other similar legislative efforts will be teased out only as businesses begin efforts to comply.  At the May 22, 2023 DCWP roundtable with business advocates/employers, the agency declared firmly its intent to collaborate with, rather than penalize, businesses working in good faith to meet the requirements of NYC Local Law 144.  That assurance, more than any FAQ or other pre-enforcement clarification, will be critical in the months ahead.