As OpenAI's release of ChatGPT in late 2022 and expected release of GPT-4 in 2023 continues to garner widespread attention, there is renewed focus on both opportunities and risks presented by the use of artificial intelligence ("AI"). With this focus comes the inevitable call for regulation. At the end of 2022, the U.S. White House weighed in through what it calls an "AI Bill of Rights" for the American public, a non-binding policy document. Banks and others in financial services should take note of the particular civil rights, privacy, and other priorities expressed in this vision for the future of AI governance. In financial services, technologies deploying some element of AI are expected to increase but already abound.

After years of building experience, developing your knowledge, and honing your skills, you are finally ready to apply for your dream job. But by the time you find out there's an opening and gather your application materials, the position has been filled. The company had recruited candidates using targeted ads on social media and career-oriented websites--ads that you never saw for reasons that are unclear to you. You then apply to another employer, where a human recruiter is impressed by your resume and advances you to the interview stage. But this time, you're rejected after an awkward recorded video interview in which you answered questions read by a computer.

If you use AI for any form of talent decision-making in your organization and it results in discrimination, whether it is by you or introduced by the AI, you are the one who is liable. When it comes to verifying the ethical nature of AI, this could be just the start of a global ripple effect. AI has the power to do a lot of good, but working on big data comes with risks. I've spent over 20 years as a workforce strategist scaling teams for some of the largest major projects in the world and have witnessed firsthand the impact of not having visibility of the skills and capabilities of my people. I've seen first-hand the amount of potential that was being wasted on our people and our business, which motivated me to develop an independently audited ethical talent AI.

Before we can discuss how this law applies, let's start with what the law actually says. This is a fairly broad bill, and one that requires a bit of unpacking before understanding the responsibilities of the employers. Unfortunately, the law, as written, does not give much guidance for employers. Let's attempt to unpack what the bill does provide. Before discussing what this means for employers, let's look at some definitions: The Bias Audit must include testing of the AI Tool to assess the tool's disparate impact on persons of any Component 1 Category.

No. 1894-A, specifically regulates the use of "automated employment decision tools" in making employment decisions, including "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 making employment decisions that impact natural persons." The law protects candidates and employees interviewing and working in New York City and provides that an automated employment decision tool may not be used to screen such candidates for employment and promotion unless the tool: (i) has been subject to a "bias audit" conducted no more than one year prior to the use of such tool; and (ii) a summary of the results of the most recent bias audit of such tool, as well as the distribution date of the tool, have been made publicly available on the website of the employer or employment agency prior to the use of such tool. A bias audit is an "an impartial evaluation by an independent auditor," and includes, without limitation, "the testing of an automated employment decision tool to assess the tool's disparate impact on persons of any [gender, race and job level] required to be reported by employers [on the Employer Information Report EEO-1] pursuant to [federal law]." Notably, the law does not state who or what qualifies as an "independent auditor." The law also requires that the New York City employer or employment agency satisfy certain notice requirements.

On Nov. 10, 2021, the New York City Council passed a bill that regulates employers and employment agencies' use of "automated employment decision tools" in making employment decisions. The bill was returned without Mayor Bill de Blasio's signature and lapsed into law on Dec. 11, 2021. The new law takes effect on Jan. 1, 2023. This new law is part of a growing trend towards examining and regulating the use of artificial intelligence (AI) in hiring, promotional and other employment decisions. The new law regulates employers and employment agencies' use of "automated employment decision tools" on candidates and employees residing in New York City.

Effective January 1, 2023, New York City employers will be restricted from using artificial intelligence machine-learning products in hiring and promotion decisions. In advance of the effective date, employers who already rely upon these AI products may want to begin preparing to ensure that their use comports with the new law's vetting and notice requirements. The new law governs employers' use of "automated employment decision tools," defined 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 making employment decisions that impact natural persons." The law prohibits the use of such tools to screen a candidate or employee for an employment decision, unless it has been the subject of a "bias audit" no more than one year prior to its use. A "bias audit" is defined as an impartial evaluation by an independent auditor that tests, at minimum, the tool's disparate impact upon individuals based on their race, ethnicity, and sex.

Seyfarth Synopsis: A new law in New York City restricts the use of artificial intelligence ("AI") to screen candidates for employment or promotion, and will take effect on January 1, 2023. Although employers have a year to prepare, those that intend to rely on AI during the hiring process after January 2023 must submit their AI tools to a "bias audit" now. Companies that use AI as a component of their hiring process should be aware of a new law in New York City that goes into effect in early January 2023. AI tools can increase the speed and efficiency of candidate reviews. However, New York City's legislature, animated by concerns that bias may be embedded within AI tools, has regulated their use.

On November 10, 2021, the New York City Council passed a bill prohibiting employers and employment agencies from using automated employment decision tools to screen candidates or employees, unless a bias audit has been conducted prior to deploying the tool (the "Bill"). The Bill defines an "automated employment decision tool" as any computational process (either derived from machine learning, statistical modeling, data analytics, or artificial intelligence) that issues a simplified output (e.g., a score, classification or recommendation) to substantially assist or replace human decision-making for employment decisions that have an impact natural persons. Under the Bill, use of such a tool is permissible if it has been the subject of a bias audit (i.e., an impartial evaluation by an independent auditor, conducted no more than one year prior to the use of the tool) and a summary of the audit results are made publicly available on the website of the employer or employment agency before deployment of the tool. Moreover, employers or employment agencies are required to provide notice to employees or candidates residing in NYC that an automated employment decision tool will be used to assess or evaluate their candidacy, no less than ten business days before using the tool. Candidates also have the right to request an alternative selection process or accommodation under the Bill.

New York City has a new law on the books--one of the boldest measures of its kind in the country--that aims to curb hiring bias that can occur when businesses use artificial intelligence tools to screen out job candidates. Employers in the city will be banned from using automated employment decision tools to screen job candidates, unless the technology has been subject to a "bias audit" conducted a year before the use of the tool. The New York City Council passed the measure on Nov. 10. Without the signature from Mayor Bill de Blasio, it "lapses" into law after 30 days, which falls on Friday. The mayor said he supports the law.