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New York City Local Law 144, a legislation that seeks to tackle discrimination risks seen in artificial intelligence (AI) hiring algorithms, has come into force in New York City. Companies and employers who breach the law will face financial penalties, increasing with each subsequent violation.

What Does the New NYC AI Law Aim to Achieve?

On July 5, a law that requires employers who use algorithms to hire and promote employees to deliver those algorithms for an audit came into effect in New York City, according to TechCrunch. The legislature, dubbed ‘New York City Local Law 144,’ represents the first-ever legislation of this type to be approved in the United States.

After submitting the algorithms for an audit, the legislation also requires employers to publicize the audit results. In addition, it mandates that companies using such solutions make disclosures to employees or job candidates.

The minimum requirements demand disclosure of the list of the algorithms companies use and an average score of candidates of different races, genders, and ethnicities are likely to receive. Furthermore, the employers must also specify the algorithms’ “impact ratios,” which refer to the average score of all people in a specific category given by the algorithm, divided by the average score of people in the highest-scoring class.

Companies that fail to adhere to the new law will face penalties of $375 for their initial violation, $1,350 for a second one, “and $1,500 for a third and any subsequent violations,” the report states.

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AI Algorithms Shouldn’t be Trusted to Make Hiring Decisions, Entrepreneur Says

According to TechCrunch, many New York City employers have welcomed the new legislation, alleging such a law should have been implemented long ago. For instance, Khyati Sundaram, Chief Executive Officer of recruitment tech firm Applied, said that recruitment AI, in particular, is like to magnify existing biases when it comes to hiring.

The recent boom in the AI sector has revealed significant issues related to racial or ethnic biases when this nascent technology is used, particularly in the banking and financial sectors. To address this risk, Singapore’s central bank has launched a new version of its open-source toolkit developed to guide financial institutions regarding the responsible use of AI in operations.

Do you think a law like the one enforced in New York City should be implemented in more regions? Let us know in the comments below.

About the author

Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate on the investment team at RW Baird’s US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firm specializing in sensing, protection and control solutions.