Regulation of AI Software in Hiring and Recruitment

Recently, we have all heard the buzz about Artificial Intelligence (“AI”) and how it is impacting the workplace. Particularly concerning are new questions raised about the disparate impact AI software may have on the recruitment and hiring of job applicants.

Companies have begun utilizing AI software to assist them in hiring and recruitment by applying the software to complete initial screenings and information gathering on the applicant pool. This can save businesses a significant amount of man hours and is typically very successful in weeding out unqualified applicants. There are increasing concerns, however, that AI software screening may fail to consider diversity and may negatively impact minorities and individuals with disabilities.
In response to these concerns, New York City passed a law in April 2023 regulating automated decision tools or AI software by requiring “bias audits”. The bias audit assesses whether the tool in question negatively impacts applicants based on their race, gender, disability, and any other protected class. The law also requires companies using AI software in hiring and recruitment to disclose its use to candidates or employees who reside in the city.

The State of New Jersey is contemplating similar legislative action. Assemblywoman Sadaf Jaffer of Mercer County, New Jersey recently proposed bill A4909, with accompanying bill S1926 in the Senate, establishing guidelines for employers to follow in order to minimize the potential negative impacts of AI software in hiring and recruitment. One of the guidelines proposed is annual “bias auditing” designed to search for and identify any patterns of discrimination.

Also like the New York City law, A4909 obligates employers to notify candidates within 30 days that a) the company uses automated software; 2) the company is subject to bias auditing; and 3) that the company used this automated software to assess the characteristics and qualifications of potential job candidates. Non-compliance with the New Jersey law could result in fines that start at $500.00 for the first violation and $1,500 for subsequent violations.

Employers should consult with their attorneys before implementation of AI software in the workplace, particularly in the area of hiring and recruitment. It is unclear at this time how results of bias audits could be used as evidence in employment law court actions against an employer.