AI Hiring Regulations in 2024: New State and Local Laws Employers Must Follow

The Regulatory Wave Has Arrived

In 2023, we covered the emerging legal risks of AI in hiring. By 2024, those risks have crystallized into specific legal obligations. Multiple jurisdictions have enacted laws requiring transparency, bias testing, and impact assessments for AI tools used in employment decisions. Employers using any automated tool to screen, evaluate, or rank candidates must now comply with a growing body of regulation.

Key Jurisdictions and Requirements

New York City Local Law 144

Now fully enforced after an extended implementation period, NYC Local Law 144 requires employers and employment agencies that use automated employment decision tools (AEDTs) to:

• Conduct an annual independent bias audit of the tool, analyzing selection rates and scoring by sex, race, and ethnicity
• Publish the audit results on the employer's website
• Provide notice to candidates at least ten business days before using the tool, including information about the tool's function, the job qualifications assessed, and the data sources used
• Allow candidates to request an alternative selection process or accommodation

The law defines an AEDT broadly as any computational process derived from machine learning or statistical modeling that substantially assists or replaces discretionary decision-making.

Colorado AI Act

Colorado enacted comprehensive AI legislation requiring developers and deployers of "high-risk AI systems" to take specific actions. Employment tools are explicitly classified as high-risk. Deployers (employers using the tools) must:

• Implement a risk management policy
• Complete an impact assessment before deployment
• Notify individuals when a high-risk AI system is used in decisions that affect them
• Provide information about how to contest an adverse decision

Illinois AI Video Interview Act

Illinois continues to enforce its law requiring employers that use AI to analyze video interviews to: notify applicants that AI will be used, explain how it works, and obtain consent before the interview. Employers must also comply with data retention and deletion requirements.

Additional Developments

Several states introduced AI employment bills in their 2024 legislative sessions. While not all passed, the volume of legislative activity signals that more jurisdictions will enact requirements in the near future. Federal legislation remains under discussion but has not been enacted.

Practical Compliance Framework

Inventory Your AI Tools

Create a comprehensive inventory of every tool in your hiring and employment process that uses AI, machine learning, or automated decision-making. Include resume screening tools, chatbot-based assessments, video interview analysis, skills testing platforms, and any scoring or ranking algorithms. Many employers are surprised by how many tools qualify.

Assess Each Tool's Legal Exposure

For each tool, determine which jurisdictions' laws apply based on where you hire. A tool used to screen applicants in New York City must comply with Local Law 144 regardless of where the employer is headquartered.

Require Vendor Cooperation

Your vendors must be partners in compliance. Require them to provide:

• Documentation of bias testing and validation studies
• Information about training data and methodology
• Cooperation with independent audits
• Contractual commitments regarding data privacy and compliance support

If a vendor cannot or will not provide this information, consider replacing them.

Conduct Required Audits

Where bias audits are required, engage a qualified independent auditor. The audit should analyze selection rates by protected category and identify any disparate impact. Publish results where required and maintain records of the audit process.

Implement Notice Procedures

Develop standardized notices for candidates informing them about AI tool usage. These notices should be clear, specific, and delivered in the required timeframe. Include information about how candidates can request alternatives or contest decisions.

Document Your Compliance

Maintain thorough records of your AI inventory, risk assessments, bias audits, candidate notices, and remediation efforts. In the event of an audit or legal challenge, this documentation demonstrates good faith compliance.

The Cost of Non-Compliance

Penalties under these laws vary but can include per-violation fines, private rights of action, and regulatory enforcement. Beyond direct penalties, a finding of biased AI hiring can cause significant reputational harm and expose the employer to Title VII discrimination claims.

The regulatory environment for AI in hiring will only become more demanding. Employers who build compliance infrastructure now will be prepared as additional jurisdictions enact requirements.