AI and Algorithms For Small Business Labor Law

AI and Algorithms For Small Business Labor Law

With all the hubbub surrounding ChatGPT and the almost daily release of tools that claim to streamline many aspects of our day-to-day lives, it may seem like life will get so much easier. For small business owners (like yours truly), ChatGPT can streamline many functions. For example, the first draft of this post was done by asking ChatGPT to summarize a recent publication from the Equal Employment Opportunity Commission, called “Select Issues: Assessing Adverse Impact in Software, Algorithms, and Artificial Intelligence Used in Employment Selection Procedures Under Title VII of the Civil Rights Act of 1964.” It was written by EEOC Commissioner Keith Sounderling and General Counsel Bradford Kelley (Both lawyers which is why you go that monster-long title). But algorithms and AI-like software has existed for years in the human resources space to help many employers, particularly small employers, to screen and manage the hiring process. Now resumes are collected and filtered by algorithms (which is why your resume is not usually read by a human until several steps down the road). But Sounderling and Kelley remind us, employers need to ensure that these tools do not disproportionately discriminate against individuals based on race, color, religion, sex, or national origin, as prohibited by Title VII.

The article provides guidance on assessing adverse impact in algorithmic decision-making tools. Title VII applies to all employment practices, including selection procedures like hiring and promotion. The article focuses on “disparate impact” or “adverse impact” discrimination, which occurs when a selection procedure disproportionately affects a protected group (just a reminder, everyone belongs to a protected class or group).

After defining key terms related to automated systems and AI, such as software, algorithms, and artificial intelligence, Sounderling and Kelley explain how these technologies are used in the workplace and their relationship to Title VII principles. Different types of software, including resume-screening software, chatbot software, and video interviewing software, are used in employment practices. These tools may incorporate AI and algorithmic decision-making at various stages of the employment process.

Title VII prohibits employment discrimination based on race, color, religion, sex, or national origin. It prohibits both intentional discrimination (“disparate treatment”) and neutral tests or selection procedures that disproportionately exclude individuals from protected groups (“disparate impact”). The document further explains the three key questions in disparate impact cases:

1) whether a selection procedure has a disparate impact,

2) whether it is job-related and consistent with business necessity, and

3) whether there are less discriminatory alternatives available.

Since most employers, and particularly small employers, make use of third-party products most often a Software as a Service (SaaS) tool, the EEOC clarifies the responsibility of employers for their use of algorithmic decision-making tools, even if developed or administered by another entity. Employers may be held accountable if the tools result in discrimination, regardless of the external vendor’s involvement. So, in other words, an employer accused of discrimination who uses a third-party tool will not be able to avail themselves of the “it is the software’s fault” defense. Ideally, software vendors are doing their own adverse impact analysis of their tool, but employers should inquire about a vendor’s assessment of adverse impact and consider whether alternatives with less disparate impact are available.

Finally, the document addresses the possibility of adjusting or replacing algorithmic decision-making tools to reduce or eliminate adverse impacts. Employers are encouraged to take steps to avoid practices that violate Title VII if they discover adverse impacts during the development or implementation of a selection tool. Well, that sounds all nice and helpful, but let’s be honest, small employers, and many large employers, do not have the time or budget availability to do away with AI or algorithmic-based SaaS tools in their human resources processes. But, a regular assessment of your hiring process and outcomes will go a long way to ensuring compliance with EEOC directives.

If you are unsure about whether you need to look at the potential disparate or adverse impact in your hiring processes, it is time to talk to an attorney. Oh, wait, I am a lawyer. You can book a consultation with me to talk about this or any other employment law-related matter.