Increased Risks for Employers Under NYC’s AI Hiring Law Compliance

Critical Audit of NYC’s AI Hiring Law Signals Increased Risk for Employers

The New York State Comptroller’s December 2025 audit evaluated the New York City Department of Consumer and Worker Protection’s (DCWP) enforcement of Local Law 144, which regulates the use of automated employment decision tools (AEDTs) in hiring and promotion. The audit concluded that current enforcement of the law is ineffective, citing, among other things, problematic complaint-handling processes and inaccurate compliance reviews.

The Comptroller’s criticism may intensify pressure on the DCWP to increase and improve its enforcement activities. Employers using AEDTs may face a more stringent approach to enforcement and are encouraged to take proactive steps to ensure their compliance programs can withstand greater scrutiny.

Overview of Local Law 144

New York City’s Local Law 144 imposes bias evaluation and transparency obligations on employers and employment agencies that use AEDTs to screen candidates or evaluate employees for promotion in New York City.

Local Law 144 defines an AEDT as any computational process derived from “machine learning, statistical modeling, data analytics, or artificial intelligence” used to “substantially assist or replace discretionary decision making for employment decisions.” The DCWP’s rules implementing Local Law 144 further explain that an AEDT “substantially assists” or “replaces” discretionary decision making when an employer (1) relies exclusively on the tool’s output, (2) weighs that output more heavily than any other criterion, or (3) uses it to overrule human judgment or other factors that had led to a different conclusion.

Under Local Law 144, employers using tools that meet the definition of an AEDT must adhere to three core obligations:

1. Independent bias audit: Employers must engage an independent auditor to conduct an annual bias audit of the tool. The audit must evaluate whether the tool has a potential disparate impact on groups of a particular sex, race, or ethnicity category by calculating selection and scoring rates and their corresponding “impact ratios.”
2. Public transparency: Employers must “clearly and conspicuously” post a summary of the most recent bias audit results on their website, whether maintained by the employer or the employment agency.
3. Candidate notices: Employers must provide clear and timely notice to New York City candidates and employees that an AEDT will be used in their evaluation. The notice must identify the job qualifications and characteristics the tool assesses and inform individuals of their right to “opt out” of the AEDT’s use by requesting an alternative selection process or reasonable accommodation.

Key Audit Findings Signal Heightened Enforcement Risk

The Comptroller’s audit, which reviewed the DCWP’s activities from July 2023 through June 2025, concluded the agency’s system for enforcing Local Law 144 is “ineffective.” The audit highlights several critical deficiencies:

• Flawed complaint intake and passive enforcement: The audit alleged a fundamental breakdown in the DCWP’s complaint-driven enforcement strategy, criticizing the DCWP for not taking proactive steps to remedy the system. The Comptroller found that complaints were often not routed correctly to the DCWP, with 75 percent of test calls made to the New York City 311 hotline regarding AEDT issues improperly routed.
• Superficial compliance reviews: The audit criticized the DCWP’s review of company publicly posted bias audits, noting that only one issue of non-compliance was identified out of 32 audits reviewed.
• Failure to utilize available expertise: The audit stated that the DCWP’s inadequate reviews stemmed from a failure to use proper procedures, including not consulting with the New York City Office of Technology and Innovation.

Implications and Recommended Actions

The Comptroller’s audit signals an expectation of heightened enforcement, putting the DCWP under substantial public pressure. The agency has agreed to implement the majority of the Comptroller’s recommendations, including:

1. Strengthening its complaint-handling process to ensure AEDT-related complaints are properly routed.
2. Providing cross-divisional training for staff.
3. Implementing written policies and procedures to promote accurate handling.
4. Enhancing its enforcement approach through interviews and demonstrations of AEDT tools.

Employers subject to Local Law 144 may expect a new phase of stringent enforcement, potentially including more frequent investigations and higher civil penalties – up to $1,500 per violation per day. To prepare, New York City employers using automated tools for hiring or promotion are encouraged to:

1. Conduct a comprehensive AEDT inventory: Work with legal counsel to inventory all third-party and in-house software used in hiring and promotion processes.
2. Achieve and maintain bias audit compliance: Secure a compliant bias audit to avoid significant penalties.
3. Verify all public disclosures and notices: Ensure that the required summary of its audit is available on the company’s website and that candidate notices are provided correctly.
4. Document compliance efforts: Maintain clear and organized records of the compliance process, including AEDT inventory and all bias audits.