The rapid adoption of artificial intelligence (AI) in employment decisions has sparked a wave of legislative action aimed at mitigating the risks of algorithmic discrimination. As organizations leverage AI tools for hiring, promotions, and other workforce decisions, they must navigate an evolving landscape of regulations designed to prevent biases embedded in these systems. Employers who proactively address these issues will not only ensure compliance but also build trust with employees and job applicants.

The Rise of AI-Based Discrimination Legislation

Several states and localities have introduced or enacted laws aimed at regulating AI’s role in employment practices, ensuring its use does not violate anti-discrimination principles.

California: AB 331 and AB 1194

California’s proposed bills AB 331 and AB 1194 seek to:

  • Prohibit discriminatory practices involving Automated Decision Tools (ADTs).
  • Mandate annual bias impact assessments of these tools.
  • Require employers to provide notice to applicants and employees about their use of ADTs.

This legislation emphasizes transparency and accountability, compelling employers to take an active role in preventing bias in their automated systems (1).

New York City: Local Law 144

New York City’s Local Law 144, which went into effect on January 1, 2023, with enforcement beginning July 5, 2023, imposes strict requirements for AI tools used in employment decisions (2, 3).

  • Employers must conduct an independent bias audit before using ADTs.
  • Audit findings must be made publicly available.
  • Applicants and employees must be notified about the use of AI in decision-making processes.
  • Penalties for violations range from $500 for a first violation to between $500 and $1,500 for each subsequent violation (4).

Rhode Island: S2888

Rhode Island’s proposed S2888 (still an active bill, not yet law) underscores the financial risks for non-compliance, introducing potential penalties of up to $10,000 per violation for discriminatory use of AI in employment decisions.

Common Themes in State Legislation

These laws share several key principles:

  1. Prohibiting algorithmic discrimination: Ensuring AI systems do not perpetuate biases.
  2. Mandatory bias audits: Independent reviews to identify and address potential discriminatory impacts.
  3. Transparency: Requiring clear notification to applicants and employees about AI usage.

Federal Oversight and Existing Protections

At the federal level, existing anti-discrimination laws extend to AI applications in the workplace. The Equal Employment Opportunity Commission (EEOC) has emphasized that tools powered by AI must comply with:

  • Title VII of the Civil Rights Act: Prohibiting discrimination based on race, color, religion, sex, or national origin.
  • Americans with Disabilities Act (ADA): Ensuring AI systems accommodate individuals with disabilities.
  • Equal Pay Act and other wage-related protections: Preventing pay discrimination based on gender or other protected characteristics (5,6).

The EEOC’s guidance highlights critical areas where AI must be applied cautiously, including:

  • Job search and recruiting: Ensuring algorithms do not exclude or disadvantage certain groups.
  • Workplace surveillance: Preventing the misuse of AI tools for monitoring employee behavior.
  • Promotion and pay decisions: Guaranteeing fairness in advancement opportunities and compensation structures.
  • Layoffs and terminations: Avoiding reliance on AI tools that may inadvertently target specific demographics.

In 2021, the EEOC launched the “Artificial Intelligence and Algorithmic Fairness Initiative” to ensure that AI and other emerging tools used in hiring and other employment decisions comply with federal civil rights laws (7).

Additionally, on April 24, 2024, the Department of Labor issued guidance on the use of AI in employment practices, further emphasizing the federal government’s focus on this issue.

The EEOC’s guidance highlights critical areas where AI must be applied cautiously, including:

  • Job search and recruiting: Ensuring algorithms do not exclude or disadvantage certain groups.
  • Workplace surveillance: Preventing the misuse of AI tools for monitoring employee behavior.
  • Promotion and pay decisions: Guaranteeing fairness in advancement opportunities and compensation structures.
  • Layoffs and terminations: Avoiding reliance on AI tools that may inadvertently target specific demographics (5).

 Six Key Considerations for Employers

To navigate this complex legal landscape, employers must adopt proactive strategies to mitigate risks associated with AI-driven employment decisions:

  1. Conduct Thorough Due Diligence
    • Before implementing AI tools, conduct an in-depth review of their functionality, data sources, and potential for bias. This ensures compliance with both state and federal regulations while safeguarding against discriminatory practices.
  2. Draft Robust Vendor Contracts
    • Work closely with AI vendors to include provisions that address:
      • Bias audits and regular assessments.
      • Data protection and privacy measures.
      • Compliance with relevant state and federal laws.
  3. Perform Regular Bias Audits
    • Employers should conduct periodic independent bias audits to identify and address potential disparities in AI decision-making processes. Regular audits demonstrate a commitment to fairness and provide a safeguard against legal risks.
  4. Enhance Transparency
    • Ensure applicants and employees are informed about the use of AI in employment decisions. Transparency not only fosters trust but also aligns with emerging legal requirements. Include clear disclosures in:
      • Job postings.
      • Internal communications.
      • Policies and handbooks.
  5. Implement Human Oversight
    • AI tools should not replace human judgment in high-stakes decisions like hiring, promotion, or termination. Incorporating meaningful human review reduces the risk of algorithmic errors and demonstrates accountability.
  6. Stay Informed on Evolving Legislation
    • With AI regulations rapidly developing, employers must stay updated on:
      • New state and federal laws.
      • Guidance from the EEOC and other regulatory bodies.

Conclusion

The rise of AI-based discrimination legislation underscores the importance of proactive compliance. By addressing potential biases and adhering to emerging regulations, employers can unlock the benefits of AI while mitigating risks.

Stay ahead of the curve with Omnus Law—your trusted partner in navigating the evolving landscape of AI and employment law. Contact us

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