If you do not already know, many employers — both large and small — use Automated Employment Decision Tools (“AEDT”) when making hiring decisions. Automated Employment Decision Tools may be as simple as using screening software to eliminate applicants with an insufficient number of years in the industry or an inadequate level of schooling/training for the job position. Or, AEDT may involve something much more complicated like having an artificial intelligence/machine learning software program evaluate aspects of a video applicant interview.

Lawmakers nationally have been worried and concerned about Automated Employment Decision Tools for several years. The concern is that the software programs are using historical data and inputs that, in reality, end up masking bias and invidious discrimination. For example, if the software tools eliminate certain universities and colleges, does that actually disproportionately eliminate certain applicants of various demographic groups that have faced historical discrimination?

In response, a couple of years ago, NYC lawmakers passed an Ordinance — known as Local Law 144 — which is aimed at preventing AEDT from subtly subverting efforts to end discrimination. Local Law and its attendant regulations went into effect on July 5, 2023.

Under Local Law 144 and rules promulgated by the NYC Department of Consumer and Work Protection, the definition of AEDT is very broad. AEDT is defined as any process or method that is “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” with respect to hiring-related decisions. If an NYC employer is using any type of Automated Employment Decision Tools, Local Law 144 requires a professional, independently conducted, detailed, and written assessment to be made of the tools being used. This written assessment is called a “bias audit.” AEDT cannot be used if the bias audit demonstrates any inherent discriminatory bias in the specific tools being used. There is a continuing duty to ensure that AEDT is non-biased. Thus, the bias audit must be done annually. Further, the results of the bias audit must be published by the employer (for example, on their website).

Local Law 144 also requires notice and an “opt-out” for any applicant. Thus, if Automated Employment Decision Tools is being used (and if the bias audit confirms that the tools do not discriminate), then Local Rule 144 requires the following notice to applicants (which must be provided at least 10 days before the tools are used):

• Notice that AEDT is being used or will be used
• Notice of what AEDT will be used to evaluate — that is, what job-related qualifications/requirements are being assessed by the AEDT
• Notice of the data/information source (or sources) being used as inputs
• Notice of the type of AEDT being used
• Notice of the employer’s data/information retention policy and
• Notice to the applicant that the applicant can ask for an alternative means of assessment — that is, an “opt-out” from having AEDT used; considered to be an “accommodation” under other labor and non-discrimination laws.

Violations of Local Law 144 can result in civil penalties of up to $375 fine per violation. Subsequent violations receive high penalties. Each part of the Law carries separate and distinct penalties. Most importantly, violations of Local Law 144 can be deemed violations of other laws resulting in fines, penalties, and punishments under those statutes.

Contact the Business and Employment Attorneys at Revision Legal For more information, contact the experienced Business and Employment Lawyers at Revision Legal. You can contact us through the form on this page or call (855) 473-8474.

Who Is Covered Under NYC Local Law 144?

Local Law 144 applies to employers and employment agencies that are located in New York City and that use Automated Employment Decision Tools in connection with employment decisions affecting employees or applicants for positions based in NYC. The Law covers hiring decisions and promotion decisions. Coverage is not limited to large employers — any size employer in NYC that deploys AEDT in covered decisions must comply.

A key definitional question is what constitutes “substantially assist or replace discretionary decision making.” The NYC Department of Consumer and Worker Protection (DCWP) has interpreted this broadly. If an AI tool generates a score, ranking, or recommendation that a hiring manager relies upon — even as one factor among several — that use likely qualifies as “substantially assisting” a discretionary decision. Employers who use AEDT merely to organize or search applicant databases without generating scored outputs may fall outside the definition, but the line is not always clear, and employers should seek legal guidance before assuming their tools are excluded.

The Bias Audit Requirement: What It Must Cover

The bias audit is the centerpiece of Local Law 144’s compliance framework. Under the DCWP’s final rules, the bias audit must be conducted by an independent auditor — a person or organization that is not the employer, the AEDT vendor, or any affiliate of either. The audit must calculate the selection rate for each “equal employment opportunity category” — specifically, by sex, race, and ethnicity as required by EEOC guidance — for each category of employment decisions made using the AEDT.

The audit must then calculate and report the “impact ratio” for each category — the ratio of the selection rate for a given group to the selection rate of the most-selected group. Any impact ratio below 0.80 — the “four-fifths rule” borrowed from EEOC adverse impact analysis — indicates potential disparate impact and will require the employer to evaluate whether use of the AEDT is justified by business necessity. The results of the bias audit must be posted on the employer’s website (or, if no website exists, made available to applicants upon request) and must remain publicly accessible for at least six months after the employer stops using the AEDT.

Candidate Notice Requirements: Timing and Content

The candidate notice requirement under Local Law 144 is independently significant. At least 10 business days before an AEDT is used to evaluate a candidate or employee, the employer must provide written notice that includes the specific items enumerated in the Law. Notice can be provided via the job posting, via the employer’s website, or through a direct communication to the candidate or employee.

The notice must describe what type of AEDT is being used (e.g., resume screening software, video interview analysis tool), what job qualifications or characteristics the tool will evaluate, and what data sources the tool relies upon. The notice must also inform the candidate that they can request an alternative means of evaluation — an accommodation that employers must be prepared to provide. Failure to provide this accommodation upon request is not merely a violation of Local Law 144; it may also constitute a violation of the New York City Human Rights Law (NYCHRL) and potentially the Americans with Disabilities Act if the accommodation request implicates a disability.

Enforcement, Penalties, and Litigation Risk

As noted, violations of Local Law 144 carry civil penalties of up to $375 per day for a first violation and up to $1,500 per day for subsequent violations. Each discrete violation — failure to conduct a bias audit, failure to publish audit results, failure to provide notice — is treated as a separate violation. An employer using AEDT tools for months without complying with these requirements could face substantial accumulated penalties.

More significantly, violations of Local Law 144 can serve as predicate acts supporting claims under the NYCHRL, which does provide a private right of action and allows successful plaintiffs to recover compensatory damages, punitive damages, and attorney’s fees. Plaintiffs’ attorneys in employment discrimination cases are already citing AEDT use and bias audit failures as evidence of discriminatory intent or practice in broader employment discrimination claims. NYC employers should treat Local Law 144 compliance not merely as a regulatory checkbox but as a component of their broader employment discrimination risk management strategy.

Best Practices for NYC Employer Compliance

NYC employers using AEDT should take the following steps to achieve and maintain compliance with Local Law 144:

• Audit all current HR technology tools to determine which, if any, qualify as AEDT under the Law’s definition
• Engage an independent auditor to conduct the required bias audit annually
• Publish bias audit results on the company website, with a direct link accessible from the careers or employment page
• Update all job postings and applicant communications to include the required AEDT notices
• Establish a documented process for receiving, evaluating, and accommodating opt-out requests from candidates and employees
• Train HR staff and hiring managers on the requirements and on the accommodation process

Contact the Business and Employment Attorneys at Revision Legal

Local Law 144 is one of the first laws in the country to directly regulate AI-driven hiring tools, and other jurisdictions are watching closely. Employers who get ahead of compliance now will be better positioned as similar legislation spreads nationally. The business and employment attorneys at Revision Legal counsel employers on employment law compliance, including emerging technology regulations. Contact us through the form on this page or call (855) 473-8474.