New York: Critical Audit of New York City’s AI Hiring Law Signals Increased Risk for Employers
New York City employers must provide clear and timely notice to candidates and employees when an automated employment decision tool (AEDT) will be used and identify the job qualifications and characteristics being assessed.
A recent Comptroller audit found that the Department of Consumer and Worker Protection (DCWP)’s enforcement of Local Law 144 is currently ineffective, citing major failures in complaint intake, compliance reviews, and use of available expertise.
The audit revealed significant operational deficiencies, including misrouted complaints, superficial reviews of publicly posted bias audits, and failure to follow established enforcement procedures.
The DCWP has committed to implementing most of the Comptroller’s recommendations, signaling a shift toward more rigorous oversight and stronger enforcement activity.
Employers should expect a more stringent enforcement phase, with increased investigations and the risk of daily penalties, and are encouraged to conduct AEDT inventories, verify compliance, and strengthen documentation.
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:
- Independent bias audit: Employers must engage an independent auditor to conduct an annual bias audit of the tool, evaluating its potential disparate impact on groups of a particular sex, race, or ethnicity category.
- Public transparency: Employers must “clearly and conspicuously” post a summary of the most recent bias audit results on their website.
- Candidate notices: Employers must provide clear and timely notice that an AEDT will be used in evaluations, identifying the job qualifications assessed.
Key Audit Findings Signal Heightened Enforcement Risk
The Comptroller’s audit, which reviewed the DCWP’s activities from July 2023 through June 2025, concluded that 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 agency for not taking proactive steps to remedy the system. The audit found that complaints were often misrouted, with 75 percent of test calls to the New York City 311 hotline regarding AEDT issues improperly routed.
Superficial compliance reviews: The audit criticized the DCWP’s reviews of publicly posted bias audits, noting that only one issue of non-compliance was identified, while the Comptroller’s review found at least 17 potential issues.
Failure to utilize available expertise: The audit indicated that the DCWP’s inadequate reviews stemmed from a failure to follow procedures, including not using the formal “Enforcement Workbook.”
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 many of the Comptroller’s recommendations, including:
- Strengthening the complaint-handling process.
- Providing cross-divisional training for staff.
- Implementing written policies for accurate handling.
- Enhancing enforcement 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 USD 1,500 per violation per day.
Employers using automated tools for hiring or promotion are encouraged to take proactive steps:
- Conduct a comprehensive AEDT inventory: Work with counsel to assess all software used in hiring and promotion processes.
- Achieve and maintain bias audit compliance: Secure a compliant bias audit to avoid penalties.
- Verify public disclosures and notices: Ensure required summaries of audits are clearly posted and candidate notices are provided correctly.
- Document compliance efforts: Maintain organized records of compliance processes, including AEDT inventories and bias audits.
