NYC Local Law 144: Complete Compliance Guide for Employers
New York City's Local Law 144 represents a groundbreaking shift in AI hiring regulation. This comprehensive guide covers everything employers need to know about compliance, from bias audits to notification requirements.
What is NYC Local Law 144?
NYC Local Law 144, enacted in December 2021 and effective since July 5, 2023, is the first law in the United States to regulate the use of Automated Employment Decision Tools (AEDTs) in hiring and promotion decisions.
The law requires employers and employment agencies using AI-powered tools for hiring or promotion decisions to:
- Conduct annual independent bias audits of their AI systems
- Publish audit results on their website
- Notify candidates and employees about AI tool usage
- Provide alternative accommodation processes
Who Must Comply?
Local Law 144 applies to employers and employment agencies that:
Coverage Requirements
Geographic Scope
Use AEDTs for candidates or employees who reside in NYC, regardless of where the employer is located
Tool Definition
Any computational process derived from machine learning, statistical modeling, data analytics, or AI that substantially assists or replaces discretionary decision-making
Decision Types
Hiring decisions (screening, selection) and promotion decisions (internal advancement)
Important Note
Even if your company is not based in NYC, if you have candidates or employees residing in New York City, you must comply with Local Law 144.
Key Requirements
1. Annual Bias Audit
Must be conducted by an independent auditor within one year before use. Audit must test for bias based on race/ethnicity, sex, and intersectionality.
2. Public Disclosure
Audit results must be publicly available on your website with specific metrics: selection rates and impact ratios for each category.
3. Candidate Notification
At least 10 business days before use, notify candidates/employees about AEDT usage, job qualifications, and data retention policies.
4. Alternative Process
Provide alternative selection or advancement process for candidates who request accommodation or reasonable modification.
Bias Audit Process
The bias audit is the cornerstone of Local Law 144 compliance. Here's what you need to know:
Audit Requirements
Independent Auditor
Must be conducted by someone who:
- Did not develop or use the AEDT
- Has no direct financial interest in the tool
- Has expertise in bias testing methodologies
Testing Methodology
Audits must calculate and report:
- Selection Rate: Percentage of candidates selected from each category
- Impact Ratio: Ratio of selection rates between groups (must be ≥ 0.80 to pass "four-fifths rule")
- Scoring Rate: For ranking systems, percentage receiving high scores
Protected Categories
Must test for bias across: Race/Ethnicity (Hispanic/Latino, White, Black/African American, Asian, Other) and Sex (Male, Female, and intersectional combinations)
Notification Requirements
Proper notification is critical for compliance. Here's what you must communicate:
Required Notice Elements
AEDT Usage
Clear statement that an automated tool will be used in the hiring or promotion process
Job Qualifications
Description of qualifications and characteristics the AEDT will assess
Data Retention
Information about data collection, storage, and retention policies
Alternative Process
How to request an alternative selection or advancement process
Timing Requirement
Notification must be provided at least 10 business days before the AEDT is used. For job postings, include notice in the posting itself.
Penalties for Non-Compliance
The NYC Department of Consumer and Worker Protection (DCWP) enforces Local Law 144 with significant penalties:
Penalty Structure
First Violation
$500 per violation for failure to conduct bias audit or provide notice
Subsequent Violations
$500 - $1,500 per violation, depending on severity and frequency
Daily Violations
Each day of continued non-compliance constitutes a separate violation
Beyond Financial Penalties
Non-compliance can also result in: reputational damage, loss of talent, legal liability, and potential discrimination lawsuits.
Implementation Checklist
Follow this step-by-step checklist to ensure full compliance:
Inventory all AI tools
Identify every AEDT used in hiring or promotion processes
Engage independent auditor
Select qualified third-party auditor with bias testing expertise
Conduct bias audit
Complete comprehensive audit testing for race, ethnicity, and sex bias
Publish audit results
Post summary of audit findings on publicly accessible website
Update job postings
Add AEDT usage notice to all relevant job postings and materials
Create notification process
Establish system to notify candidates 10+ days before AEDT use
Develop alternative process
Create accommodation procedures for candidates who request alternatives
Train HR team
Educate hiring managers and recruiters on compliance requirements
Document everything
Maintain records of audits, notices, and accommodation requests
Schedule annual audits
Set up recurring audits to maintain ongoing compliance
Best Practices for Compliance
✓ Do
- • Start compliance process early
- • Choose auditors with proven expertise
- • Be transparent with candidates
- • Document all compliance efforts
- • Review vendor contracts for compliance
- • Train your team thoroughly
- • Monitor for regulatory updates
✗ Don't
- • Wait until the last minute
- • Use biased or outdated tools
- • Hide AEDT usage from candidates
- • Ignore audit findings
- • Assume vendor compliance
- • Skip alternative processes
- • Neglect ongoing monitoring
Need Help with NYC Local Law 144 Compliance?
Our platform automates bias audits and compliance reporting for NYC Local Law 144.
Start Free Audit