NYC Cracks Down on AI Use in Hiring Decisions

New York City has become the first city in America to regulate artificial intelligence (AI) use in hiring.

A report Wednesday (July 5) by The Wall Street Journal (WSJ) examined the law, dubbed NYC 144, which requires companies that use AI software to help with hiring and promotion to audit those tools each year to identify possible racial- or gender-based biases and publish their findings.

While the law is designed to stop discrimination, “it’s really not an antibias law. It’s a public disclosure law,” said Erin Connell, who represents employers as an attorney with Orrick, Herrington and Sutcliffe, in the report.

She added that lawmakers and industry groups are paying attention to 144 as a possible guide for future AI regulation.

Earlier this year, a group of federal regulators published an open letter cautioning that AI had the potential to “perpetuate unlawful bias, automate unlawful discrimination and produce other harmful outcomes.”

The NYC law mandates that employers publish what are known as “adverse impact ratios,” which show whether their hiring procedure had a negative effect on a particular race or gender, per the WSJ report. Failure to publish that information can cost companies penalties of up to $1,500 per violation for each day they don’t comply.

The potential to promote bias and discrimination is among many reasons critics of the technology have called for stricter curbs on AI.

Among them is Sandra Watcher, professor of technology and regulation at Oxford University, who in May cautioned against “science fiction fantasy” worries about AI — as in, the technology leading to a nuclear war — and ignoring here-and-now concerns.

Meanwhile, PYMNTS wrote last week about the varied regulatory approaches being taken by the U.S., China and the European Union to govern AI.

The EU has arguably moved the fastest, adopting rules that line up with the rights-driven approach popularized by past tech-focused digital regulation policies.

“It’s an interesting Rorschach to figure out, you know, what is important to the EU versus what is important to the United States,” Shaunt Sarkissian, founder and CEO at AI-ID, told PYMNTS last month. “If you look at all rules that come out of the EU, generally they tend to be very consumer privacy-oriented and less fixated on how this is going to be used in commerce.”