By Christopher D. Warren

AI is transforming hiring, but many companies don’t realize the legal risks that come with it. In this episode of “The Moral Machine,” host Chris D. Warren sits down with employment attorney Elizabeth Schlissel to discuss New York City’s Local Law 144, one of the first regulations designed to address AI bias in hiring and recruiting.

Together, they explore the real-world consequences of AI discrimination, including the well-known case of Amazon’s resume-screening tool, and explain what employers must do to stay compliant. Learn about required bias audits, candidate notification rules, public disclosure requirements, and the penalties businesses can face for noncompliance.

Elizabeth also shares practical guidance on managing AI vendors, identifying “shadow AI” risks within organizations, and building governance policies that protect businesses as AI regulations continue to evolve.

Whether you’re a business owner, HR leader, recruiter, attorney, or technology professional, this conversation offers valuable insight into the future of AI compliance, employment law, workplace technology, and responsible hiring practices.

Elizabeth Schlissel is Chair of the Labor & Employment Practice Group at Falcon Rappaport & Berkman and a leading voice on workplace AI regulation and employment law.

“The Moral Machine,” hosted by Chris D. Warren, explores the intersection of artificial intelligence, ethics, law, business, and society through conversations with leading experts shaping the future of technology. Subscribe for more discussions on AI governance, compliance, innovation, and the human impact of emerging technologies.

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Transcript:

**This transcript has been prepared automatically by AI and may contain inaccuracies**

Chris D. Warren [00:00:00]:
Hi, I’m Chris Warren, your host from Moral Machine. I’m the co chair of the AI Practice Group at FRB and I’m joined today by Elizabeth Schlissel, who is the chair of the employment practice. We’re going to talk About Local Law 144 in New York City and how it applies to businesses both in the city as well as anywhere else that’s looking to hire people using AI tools.

Elizabeth Schlissel [00:00:19]:
Thank you, Chris. I’m so excited to be here today to talk not just about Local Law 144, but but one of my favorite topics regarding employment law, AI in the workplace. So I’m excited to dig in to see what Local Law 144 requires and how companies can be compliant.

Chris D. Warren [00:00:39]:
Liz, tell us a little bit about the genesis of this and where it’s coming from and why is New York first?

Elizabeth Schlissel [00:00:45]:
This law came about years ago and it was one of the first in the nation, I think actually was, you said, the first AI regulatory law in the country. And what happened was back in like 2018, Amazon built this experimental AI sorting tool that would rank and sort resumes. And what came to light and became public was that this sorting tool was actually discriminating against female candidates. And if the resumes had anything like women’s or women’s channel, Chess club or women’s initiatives, things like that, they would actually lower them in the ranking in the algorithm. So this was the first time it became really public that, oh my goodness, these AI sorting tools, while really efficient, can also discriminate because it’s based on what the programmers put into it. So When Local Law 144 was enacted, the goal was to notify the public that these tools are out there. The law really comes down to three duties. So you need to, if you’re using these types of AI sorting or ranking tools for the employment process, you need to audit it.

Elizabeth Schlissel [00:02:05]:
What does that mean? That means you need to conduct an independent audit of the tool to make sure that it’s not being biased in its decision making. You need to publish that audit, preferably on your company’s website. And then you need to warn people, you need to notify the candidates that you’re using this type of AI tool in the employment hiring practice.

Chris D. Warren [00:02:31]:
So when was this law passed in New York?

Elizabeth Schlissel [00:02:34]:
It was passed back in 2021, but they with these types of new laws, especially when they’re first at the time, New York City often gives employers some time to ramp up and get compliant. So it didn’t take effect until January 2023. But the interesting thing was when, you know, in January 2023, ChatGPT and Claude and all these other tools weren’t such a huge thing. So. So, okay, we identified a problem in New York City. We found out that some companies are using these potentially discriminatory tools. We put a law on the books. Great.

Elizabeth Schlissel [00:03:14]:
We did our job.

Chris D. Warren [00:03:15]:
That’s it, we’re done.

Elizabeth Schlissel [00:03:18]:
But Chris, as you know, what happened next was a whole lot of nothing. We haven’t heard anything about companies being audited or companies being fined or, or anything really about the enforcement of this law at all. Even in the midst of this huge, what some people call AI bubble.

Chris D. Warren [00:03:39]:
Do you really think it’s a bubble? Is.

Elizabeth Schlissel [00:03:42]:
No, no. People call it a bubble. A bubble. You know, bubble has a derogatory, negative tone, you know, feeling. And I think AI is here to stay.

Chris D. Warren [00:03:50]:
Yeah.

Elizabeth Schlissel [00:03:50]:
And I think, you know, it’s. If you are not using AI in your workday to be efficient, I think you’re going to be left behind, especially no matter what industry. I think I saw like a poll recently, Chris, that like the only industry that isn’t significantly impacted by AI is the food service industry.

Chris D. Warren [00:04:13]:
Makes a lot of sense. What if I’m a company outside of New York City and I’m in Arkansas and I want to hire a remote worker in New York City? Does this law apply to me?

Elizabeth Schlissel [00:04:24]:
It absolutely does, Chris, and thank you for bringing that up because it’s one of the biggest misconceptions about the law. The company says it doesn’t apply to me. I’m based in Texas or Ohio. But if you’re hiring remote workers that can do their jobs in New York City and they’re working remotely, this absolutely does apply to you. And we will see these long arm enforcements for companies not just inside New York City, but also that outside New York City hiring New York City workers.

Chris D. Warren [00:04:56]:
Wow, that’s incredible. That’s absolutely incredible. This isn’t going to go away anytime soon. In fact, to your point, I believe it’s going to be something that, that’s ubiquitous across the country. So how do I, how would I. If you’re representing a company, how would you, how would you advise them to structure their process so that they don’t run afoul of these laws?

Elizabeth Schlissel [00:05:17]:
One of the best ways is if you’re hiring a vendor, make sure that we’re negotiating that vendor agreement and that we’re actually seeing the audits that are being done and that, you know, it’s one thing for it to be in the contract, it’s another thing for it to actually request a copy of the audit if you’re doing it internally. You need to make sure that you’re hiring a company that can conduct these audit biases on an annual basis. It’s not a one and done thing. It, it needs to be done every year. You need to be posted in a clearly visible place on the website and you need to notify your applicants that you are using these AI screening tools as part of the application process. So you know, it’s identifying what the company is doing, making sure they’re in compliance, and making sure that they’re in compliance on an annual basis and not just one and done. Because remember those fines, it’s 500 to $1,500 a day. So don’t think that you can post an audit from 2023 and be good.

Elizabeth Schlissel [00:06:17]:
You need to do it annually. And it’s easy for the department to find and see if you are in compliance or not.

Chris D. Warren [00:06:25]:
Are there any reporting requirements that the city has for companies or is that just something that you just have to have?

Elizabeth Schlissel [00:06:32]:
So it’s interesting, you know, the company has to decide whether or not they’re using AI tools, but many companies don’t even realize that they are using AI tools and that this law applies to them. So the first step is to really start the conversation with the hiring managers and HR and see what tools they’re using and whether or not those tools are actually AI screening tools. And if so, start the audit process, start posting it and start notifying the applicants right away.

Chris D. Warren [00:07:01]:
I had a question about the audit. So you’re this annual audit. Companies have to publish this on their website. It’s public facing material like how is this, how is that regulated and what, what is the importance of that when you’re, when you’re discussing labor law?

Elizabeth Schlissel [00:07:17]:
So it’s interesting. The law actually requires that you conduct an audit to identify whether or not there’s any bias issues. And you know, I like to. A good way to describe it is imagine like a turnstile doorway and 100 women are going through the turnstile and 100 men are going through a turnstile. How many actually get through? How many are actually screened through and is it lopsided? And that’s really all the audit is supposed to do. Is there some lopsided? How much of this protected category and that protected category are getting through? Interestingly enough, it doesn’t require that the company correct anything. There’s other laws to protect against discriminatory hiring practices such as new York State human rights law, New York City human rights law. But this specific law is really just saying we know AI isn’t perfect because people aren’t perfect and they’re programmed by engineers so to really inform the applicants who are applying for these jobs, you need to conduct these audits.

Elizabeth Schlissel [00:08:26]:
So we’re able to identifying whether or not there’s some discriminatory and bias issues with the screening process.

Chris D. Warren [00:08:34]:
So if, if I’m an employer and I have, and I’m looking for someone to fill a certain position and I don’t have these audits and I do use AI, or even if the company doesn’t permit the use of AI, but the employees of the company that are the first line of screeners or the first line of interviewees are, are using these tools, what type of consequences could there be for my business? And how does a company prepare itself for the eventuality of shadow AI where the employees themselves are using these tools to make these decisions on hiring?

Elizabeth Schlissel [00:09:10]:
So the penalties run between $500 to $1,500 per day for each violation. So that can add up really quickly. So if, for example, if there was an audit done and you were using these screening AI tools and you were not doing the audits and you didn’t have anything posted on your website notifying your applicants that you’re using it, you know, if they do the maximum fines, it’s 1500, you know, you’re done for a year, 365 days a year times 1500. That’s how you get these really hefty fines. Now with enforcement, I will tell you, I said earlier, a whole lot of nothing’s been happening with enforcement, but I predict that’s going to change. Chris and the reason is in December of last year, In December of 2025, there was an audit where they of the reporting agencies for New York City to be able to report violations of this law, which is the Department of Consumer and Worker Protection. So you call the New York City through in one number and you still want to say, I applied for this job. And I’m pretty sure that they used an AI screening tool and they didn’t notify me of it.

Elizabeth Schlissel [00:10:23]:
Well, more likely than not, if you try to make a complaint, you either got misrouted to the wrong government agencies or even disconnected. That’s what a consumer, the comptrollers department did this audit last year and said you can’t even report violations. They’re not enforcing this. So with that realization that there was this hole in this reporting ability of the public, the Department of Consumer and Worker Protection has come out and said, we are going to address this reporting problem and we’re going to fix it. And I will tell you as a former government worker and as an employment attorney, the best way to get a government agency to do something is to publicly embarrass them. And that’s what this comptroller audit did. It embarrass the agency and say, we enacted this great law first in the nation and then you’re not even enforcing it. So while you haven’t heard these like crazy fines of companies yet of these $500 to $1,500 a day, Chris, I think that’s on the horizon.

Elizabeth Schlissel [00:11:38]:
So if you’re not compliant now as a company and you’re using these tools, it’s important for you to get compliant now. And you said a really interesting thing, Chris, you said about like shadow AI and maybe the company has a policy, but then the employees are using it. I see a lot also with vendors. Oh, it wasn’t us. We hired this recruiting firm and it’s on them. The liability actually goes to the hiring company. So you could hire a third party vendor and they’re screening on your behalf and the company, not the vendor, is liable, which is pretty crazy. So it’s not just making sure that your tools for your own company are compliant.

Elizabeth Schlissel [00:12:25]:
When negotiating these vendor agreements, you need to make sure that your vendor agreements, that the vendor is representing, that they’re complying as well.

Chris D. Warren [00:12:36]:
This is a shameless plug for the AI practice group at Falcon, Rappaport, Berkman frb. This is exactly the type of work that we do in advising clients and creating governance as well as privacy issues, regulatory issues, and making sure that they’re aware of the laws that impact their business models before they wind up with a fifteen hundred dollar a day fine. So thank you for bringing that up. Do you see a private right of action changing this with companies in New York City and now outside New York City that could be hit with these fines?

Elizabeth Schlissel [00:13:10]:
Well, there is for these types. This law doesn’t have a private right of action. But I think that is absolutely on the horizon. I think that’s what a lot of legislators are contemplating because these tools are discriminating and they’re discriminating so much more than we even realized. Because as you start using these AI tools more and more, you start to realize that a lot of times they’re people pleasers. And that’s coming to light a lot more. So you find out that, okay, the AI wants to please the person putting in the input. Now, a potential way that you see these potential biases coming out in these, like AI screening tools is, okay, so the AI tool will be like, what are your top computer engineers at ABC Company? And they said, okay, let me put in here are 20 top computer engineers at our company.

Elizabeth Schlissel [00:14:09]:
And we’ll look. Here’s their whole hiring packet, here’s their applications. Well, the company, since the hiring is done by people historically, they could also be skewed as well as applicant pools that the company has reached out to. So over 50% of those hiring of those star workers could be men who graduated Stanford in the 1990s. Now when the AI tool, if they’re looking at the applicants, they may say, okay, I’m going to look for males who graduated Stanford in the 1990s. And they’re going to discriminate against whether it’s gender or national origin or even, you know, unprotected areas such as school. You know, I’m going to, you know, I’m going to sort out all people who went to Stanford for this or MIT and rank them higher than others. Meanwhile, the recruiter or the hiring manager doesn’t even want those factors considered in the hiring process.

Chris D. Warren [00:15:13]:
If it’s still liable under this law, they’re still going to be held. But the company would be held liable for the practices of a third party.

Elizabeth Schlissel [00:15:20]:
Yes, if they don’t audit, disclose and post it. So that’s, those are the kind of key things here. But you mentioned something that I went a little off track on. Private right of actions employment is one of those areas that you really see how laws are changing pretty quickly. And I do think that we will see some test cases about discrimination laws. And I think that New York is ripe for those types of claims because New York City human rights law gives workers so many protections. I think, you know, the only other like Louisiana county and San Francisco are competing counties with protections that they give their employers. But New York and California and those cities are right neck and neck.

Elizabeth Schlissel [00:16:11]:
So if there were going to be these types of private right of actions, I would see it either in California or New York saying that, you know, the discrimination in the hiring process and the way that I would see this would be a lot of like test cases. Like you have those like serial plaintiffs with. You see some, you see, we see these a lot on these privacy lawsuits that are being filed across the nation. You have like one plaintiff who goes to 70 websites and says, oh, I wasn’t provided with a privacy notice. I’m going to Sue. The same thing I can see coming from employers and the employee website saying, oh, I applied there, I didn’t get hired. I must have been discriminated against and you didn’t notify me.

Chris D. Warren [00:16:57]:
So this sounds almost like it’s a strict liability issue. If you’re a company that’s operating in the state of New York or in New York City and you are doing business with any company in the country and they are using AI tools in any part of your. Of your hiring practice, you as a company are essentially exposed. And if you do not have these auditing requirements fulfilled, if you don’t have governance issues ironed out, if you don’t have all these different agreements with these vendors, either indemnification or contractual obligations for them to use these tools in an ethical manner, you’re almost sort of taking a huge risk. It’s a giant gamble. If you’re going to get stuck with a massive fine, that’s going to probably put you out of business.

Elizabeth Schlissel [00:17:50]:
Absolutely. It could definitely significantly impact your bottom line if not put you out of business if you’re not compliant. And, you know, this is just the start, Kris. There’s going to be so many more of these laws enacted. And look, this law came to, has had a slow start. It’s gaining some traction. It’s been in the news recently with a recent comptroller audit. So you have a lot of copycat states and cities, and that happens a lot with New York City.

Elizabeth Schlissel [00:18:17]:
It’ll be like, New York City enacts a law, then maybe California enacts a law, and then it’s here. Then you see, okay, Colorado, Massachusetts and some of the other states start, you know, picking up the same type of laws and enacting them, putting them on the books. So this is something that we’re going to see more of. And it also is an issue because right now it’s like the companies are trying to monitor themselves and it’s very challenging for them to do. And a big misconception is, well, I’m not based in New York City, so I don’t need to apply at. This doesn’t apply to me. But if you are hiring people in New York City and it’s open to a candidate who can apply for New York City, this absolutely applies.

Chris D. Warren [00:18:58]:
So it sound, it sounds like, it sounds to me that if you’re a business operating in New York and you don’t have these protections, you need to pick up the phone and call you immediately. That’s what it sounds like to me.

Elizabeth Schlissel [00:19:12]:
I think so you know, it’s like the company’s, you know, correcting their own homework. So saying, like, I don’t have this, so it doesn’t apply to me, so I’m fine.

Chris D. Warren [00:19:23]:
That doesn’t sound like it’s going to work anymore.

Elizabeth Schlissel [00:19:25]:
It doesn’t. Because what, you know, the. It’s what they don’t know, Chris. And just like we said, you know, it’s their vendor does. Their vendor agreement, was it properly negotiated? So when we work with clients, we do a holistic approach. So, okay, so what are your actual policies? Okay. And the company. Talk to the company president, and they’ll be like, liz, we don’t use any AI tools in our hiring process.

Elizabeth Schlissel [00:19:52]:
I said, that’s great. Can we also get on a call with your HR director and hiring manager? Yes. Oh, yeah. We use. We use this tool and that tool and that tool. Oh, those tools use AI. Those are just sorting tools. That.

Elizabeth Schlissel [00:20:10]:
That’s an AI triggers an audit. Or they say, this doesn’t apply to us. We use a vendor. And I was like, let me see your vendor agreement. And they. And I was like, is your vendor complying with the audit? But that’s their liability. No. According to the law, you have to do it.

Elizabeth Schlissel [00:20:26]:
So when we work with companies, we take a look. We look. I like to say we look under the hood, because it’s no good to fix one leaky pipe if something else is just waiting to burst. So one of the first things I do when I work with a client is say, send me your onboarding package. Send me your policies and practices, and the next step is what’s actually being done. Because I like to say policies are a fancy piece of paper, but if no one’s actually following them and enforcing them, that’s all they are, is a fancy piece of paper that everyone’s ignoring.

Chris D. Warren [00:21:01]:
Yeah, it’s got to survive impact with reality, that’s for sure. And, you know, the policy is just step one. It’s got to be governance behind it and a process behind it, and who owns that, that process, who’s ultimately responsible for enforcing that. And, you know, that’s. That’s. That’s a paramount concern for any company operating in New York City. So tell me, we’ve been talking a lot about businesses and how they have to be compliant with this law and how they use AI and their practices in both hiring, productivity management. But how about the employee? What can the employee do to make themselves more attractive to businesses? What are you seeing in the marketplace?

Elizabeth Schlissel [00:21:38]:
I think employees who embrace AI and can really perfect how their queries and their searches are going to set themselves apart and above other candidates. Companies are all about embracing technology these days and being as efficient as possible and, and they’re looking for applicants who put right on their resume that they’re proficient with. Claude proficient with ChatGPT. While it used to be almost a stigma, now it’s definitely a positive. And I think that employers are absolutely looking for employees who are able to use these tools correctly.

Chris D. Warren [00:22:17]:
So when companies are looking to hire talent, are there any limitations on the types of things they can disclose in terms of can you use AI, Is that prohibited? Is that discriminatory? What could companies do to make sure that they get the right talent but also don’t run afoul of any type of law that’s gonna, that’s going to cause damage to the company.

Elizabeth Schlissel [00:22:40]:
You want to make sure when you’re wording your job posting that you’re complying with all the anti discrimination laws and you always want to avoid language like recent college graduate because that has stigma, that you’re looking for someone who’s under 40 years old and could potentially subject you to an age discrimination claim. But regarding the use of AI tools, you can absolutely list it as one of the criteria. Just like companies list that they want employees to be proficient with Excel or Word, they often are now listing Claude chatgpt AI proficient. So that is just one of the metrics that companies are doing, determining whether or not the employee has the right skills to perform the job. Because as I said, more and more companies are embracing AI and using AI is going to be part of the employee’s day to day life.

Chris D. Warren [00:23:35]:
So tell me a little bit about your practice. How are you using AI to help your clients meet their objectives?

Elizabeth Schlissel [00:23:44]:
So AI is infiltrating every aspect of the employment relationship right now from whether it’s companies and clients coming to me saying I have this great form ChatGPT document that I received to them saying, oh, I received this employee complaint and I look at it and it’s clearly drafted by AI. So companies need to be educating themselves as well as working with AI proficient attorney who can really help guide them through things. One of the biggest areas that I’m seeing is companies are saying, oh yeah, we’re using AI for everything. And I’m like, well do you have an enterprise system? Do you have, you know, what type of guardrails do you have up? And they’re like oh no, it’s my personal account. And this employee’s using their personal account and a Big issue that’s coming to light is there’s no confidentiality. So talking about a plug for frb, Chris, One of the great things that our firm offers, as you know, is we have chatbots that are closed systems and protected by the attorney client privilege. So what we can do is we can upload all the company’s documents, we can analyze them together in a transparent way so the the client can see what I’m looking at and they can ask the chatbot questions, and then we can show how we update them to bring them into compliance so that it’s not like I’m not hiding the ball and pretending like I’m not using AI. Everyone’s using AI.

Elizabeth Schlissel [00:25:14]:
Let’s do it together with guardrails in a way that makes the company compliant and that we’re providing efficient legal advice. So things that used to take hours can now take minutes. You know, it’s a tool. Everything needs to be reviewed and checked for accuracy and cross referenced. But it’s a great starting point and it’s a great way to keep the client informed along the process.

Chris D. Warren [00:25:42]:
Ethics, Human in the loop governance. These are the things that. That are required to make sure that AI is not running your company, that a human is running your company with AI. So, Liz, thank you so much for, for joining us today on Moral Machine. We got to remember that we took the oath and the bots did not really appreciate your time today, and I hope that companies out there are listening to the good wisdom that you’re providing them and reach out to make sure that they’re compliant with New York City law.

Elizabeth Schlissel [00:26:12]:
Thank you so much for having me. It was great discussing this new Local 144 law with you and we’ll see what happens with enforcement. If you’re an employer out there and using AI tools in the hiring process, give us a call at Falcon Rap Port in Berkman. Thank you.