New York City’s Local Law 144, enacted to address bias in automated employment decision tools (AEDTs), is a game changer for HR tech companies. As artificial intelligence (AI) continues to shape online hiring processes, the law emphasizes the need for fairness and transparency in AI-driven decisions. Companies failing to comply face reputation damage and fines, making HR tech compliance essential for both vendors and employers.
Let’s break down the law and how HR tech companies can prepare.
HR tech compliance: NYC Local Law 144
NYC Local Law 144, also known as the NYC Bias Audit Law, was enacted in 2021, went into effect on January 1, 2023, and began enforcement on July 5, 2023. The law has the following key provisions:
- NYC Local Law 144 mandates bias audits for AEDTs used in hiring and promotion decisions within NYC.
- These audits must be conducted by an independent third party, with results made publicly available.
- The law requires clear communication of AEDT usage to candidates, including an opt-out option.
Who is affected?
Employers and employment agencies
These entities must comply with the law if they use Automated Employment Decision Tools (AEDTs) to assess candidates or employees for promotions. This applies to employers with offices in New York City, even when hiring for remote positions.
Vendors of AEDTs
While the law primarily focuses on employers who use AEDTs, vendors are indirectly impacted because their tools must meet the compliance requirements employers are obligated to follow. This means vendors must ensure their AEDTs are auditable for bias.
Job applicants
The law is designed to protect full-time and part-time job applicants from unfair hiring practices by requiring employers and vendors to be transparent about the use of AEDTs. Applicants have the option to decline the use of AEDTs in their evaluation, providing them with more control over their hiring process.
Comparing NYC Local Law 144 with other AI regulations
NYC Local Law 144 aims to ensure fairness, transparency, and accountability in AI-driven hiring tools. Here’s how the NYC bias audit law compares to other HR tech regulations:
How NYC Local Law 144 impacts HR tech
The role of AEDTs:
AEDTs are tools that rely on algorithms to automate or assist with employment decisions. Examples include resume screening software, chatbots for candidate assessments, and video interview analytics.
Compliance requirements for HR tech companies:
To align with Local Law 144, HR tech companies must:
1. Conduct annual third-party audits to identify and mitigate bias in AEDTs.
The bias audit evaluates the AEDT's impact on different demographic groups, focusing on gender and race/ethnicity, including their intersections (e.g., Asian women, White men). If the AEDT is using pass/fail outcomes, the audit needs to measure the selection rate for each group and calculate the number of candidates who pass divided by the total number of candidates in the group. For AEDTs with continuous score outputs (e.g. numerical score of 80 out of 100), the audit needs to examine the scoring rate and outlines the proportion of candidates in each group who scored above the median score.
2. Provide documentation demonstrating the fairness of their tools.
Employers are required to provide candidates with at least 10 business days’ notice before using AEDTs. Candidates must also be given the option to request an alternative assessment method, where reasonable.
3. Ensure results are accessible to clients, job applicants, and other stakeholders.
Employers are also required to publish the results and the date of their most recent AEDT audit. Examples: Beamery’s Bias Audit Report and Popp’s Bias Audit Report.
Third-party audits are crucial because they provide an unbiased assessment of whether an AEDT has discriminatory outcomes. Besides compliance, the impartial review helps build credibility by showing stakeholders and job applicants that the hiring evaluation is not influenced by vendor or employer’s interests. Moreover, failure to comply can result in fines, damage to reputation, and potential loss of trust.
Practical checklist to ensure compliance
Step 1: Identify AEDTs in use
Start by mapping out all tools in your HR ecosystem that fall under the law’s scope. Look for any AI-driven tools used for resume parsing, candidate ranking, or interview analysis.
Step 2: Prepare for audits
Collect necessary information, such as data sets, decision criteria, and documentation of model performance. This ensures auditors have what they need for a thorough analysis.
Step 3: Choose a third-party auditor
Select an independent auditor with proven expertise in AI compliance and bias detection. Here at Warden AI, we can streamline this process with our AI Assurance Platform, offering continuous audits tailored to regulatory standards like NYC Local Law 144.
Step 4: Communicate results transparently
Share audit findings clearly with job applicants, employees, and other stakeholders. Transparency not only ensures compliance but also builds trust in your commitment to fairness.
HR tech companies aiming to stay ahead and maintain a competitive edge should closely monitor updates and trends related to NYC Local Law 144 compliance. By following the checklist, organisations can meet the requirements of the regulation while promoting fairness in their hiring practices.
Common HR tech compliance pitfalls to avoid
Staying compliant with legislation like NYC Local Law 144 requires more than ticking boxes—it demands proactive efforts to address key challenges. Here are three common pitfalls HR tech companies should avoid to ensure seamless compliance:
1. Overlooking bias metrics
Bias detection must be prioritised for compliance with Local Law 144. Ignoring these metrics can lead to unfair hiring practices, potentially putting certain demographic groups at a disadvantage. Regularly measuring bias ensures that AEDTs provide equitable outcomes, reducing the risk of discrimination and the legal liabilities that come with it.
2. Poor stakeholder communication
Transparency is crucial when using AEDTs in hiring. Failing to communicate clearly with stakeholders—including job applicants, employees, and regulators—can reduce trust, harm your company’s reputation, and result in lost business. Employers must share audit results openly and address any concerns quickly to demonstrate a commitment to fairness and accountability.
3. Delaying bias audits
Timely audits are not just a legal requirement—they’re essential for identifying and addressing issues before they escalate. Postponing audits can lead to rushed evaluations, compliance failures, and hefty fines. Scheduling regular audits helps you stay ahead of deadlines, avoiding the penalties and reputation risks of non-compliance.
Why is it important to be proactive in compliance?
Proactive compliance with Local Law 144 goes beyond meeting legal requirements—it’s an opportunity for HR tech companies to build trust with stakeholders and job seekers by demonstrating fairness and accountability. By addressing potential biases early and sharing transparent audit results, companies can enhance their brand reputation and stay competitive in the talent market. Partnering with experts like Warden AI ensures not only compliance but also a commitment to ethical AI practices, helping businesses lead with integrity and gain a clear edge.
Conclusion
Navigating HR tech compliance with Local Law 144 is both a challenge and an opportunity. Companies that invest in bias audits, prioritise transparency, and work with trusted partners like Warden AI can achieve more than legal adherence—they can set a higher standard for fairness, trust, and innovation in the hiring process. If your HR tech company needs assistance meeting the compliance requirements of NYC Local Law 144, schedule a call with us today to discuss your needs.
