The Equal Employment Opportunity Commission (“EEOC”) recently released a technical assistance document titled “Assessing Adverse Impact in Software, Algorithms, and Artificial Intelligence Used in Employment Selection Procedures Under Title VII of the Civil Rights Act of 1964” (the “Guidance”). The Guidance is part of an EEOC initiative to ensure that software and other technologies comply with federal civil rights laws,  and addresses the fact that AI algorithms used by employers appear to have many of the same flaws as the human biases they purport to avoid.

Disparate Impact Discrimination 

Disparate impact discrimination occurs when an outwardly neutral policy or practice has the effect of disproportionately excluding persons based on a protected characteristic (e.g., sex, race, religion, disability) – even if there is no discriminatory intention. 

The Guidance urges employers to follow the Uniform Guidelines on Employee Selection Procedures to assess the potential disparate impact of AI tools when employers use them to “hire, promote, terminate, or take similar actions toward applicants or current employees.” While most employers are not intentionally setting up technology to select or exclude people based on protected characteristics, even facially neutral automated decision-making software might disproportionately exclude people of a certain race, gender, etc. For example, minimum height requirements and physical strength tests can have a disparate impact on women; or an algorithm to sort applicants based on their zip code’s proximity to the employer’s offices could inadvertently exclude applicants of a particular race whose neighborhood is further away. An employer’s use of the following tools can raise issues under Title VII:

• Résumé screening software;
• Chatbots for hiring and workflow;
• Employee monitoring and analytics software; and
• Video interviewing software.

Employer Liability

The Guidance confirms that employers typically will be responsible for any discriminatory results produced by software they license from third parties, regardless of who is responsible for developing the AI. Accordingly, the EEOC specifically advises employers to explore with the vendor the extent to which a tool has been tested for disparate impact, and the extent to which it has been validated as a reliable means of measuring job-related characteristics or performance. 

The EEOC “encourages” “self-analyses on an ongoing basis,” including to “determine whether employment practices have a disproportionate negative effect on a basis prohibited under Title VII or treat protected groups differently.” “Failure to adopt a less discriminatory algorithm that was considered during the development process [] may give rise to liability.”

Key Takeaways

• Employers who use or are considering using an automated decision-making tool should carefully evaluate the tool for accuracy and bias, and ensure its results do not violate Title VII or any other civil rights laws. 
• Employers should understand how they use AI and which employment-based decisions might impact their compliance with Title VII and a complicated web of related state and local laws. 
• Employers should take stock of any AI tools used in employment decision-making and consider assessing their adverse impact. If they identify an adverse impact and continue to use the tool, they should conduct validity studies that demonstrate the legitimate basis for using the selection process.
• Employers should continue to analyze their use of automated decision-making tools and understand recordkeeping requirements. 
• Employers who license automated decision-making systems should review their contracts and diligence processes, and have a clear understanding of how the AI developer tested and validated its tools for accuracy and bias and how liability may be allocated should legal issues involving alleged discrimination arise. 

The EEOC is likely to impose a rebuttable duty for employers to seek out “less discriminatory” algorithms during the selection process. Conducting these analyses with the assistance and advice of counsel offers some protection from potential liability. Employers may wish to consult outside counsel for an independent bias audit on these tools and to discuss what other measures may be necessary in this evolving area. Should you have any questions about the use of AI in employment decisions, please feel free to contact any member of our Labor and Employment team.

The information contained in this document does not constitute legal advice.

[1] The agency previously issued a similar guidance on complying with the Americans with Disabilities Act when using such tools.

[2] This is especially important for federal contractors and companies with 100+ employees.

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In the decision, McLaren Macomb, the Board reviewed confidentiality and non-disclosure provisions that restricted the employee from disclosing the terms of the severance agreement to “any third party” and barred the employee from making any statements “to Employer’s employees or to the general public that could disparage or harm the image of the Employer….” 

The Board used a “reasonable employee” standard, and held that broad restrictions have a tendency to interfere with, restrain, or coerce employees’ exercise of their rights under Section 7 of the NLRA, including filing a charge with the NLRB. The Board found the non-disparagement and confidentiality provisions to be unlawful because they:

• Prevented the employee from making a statement that the employer had violated the NLRA to their former coworkers, their union, the Board, or otherwise;
• Was not limited to the employee’s relationship with the employer;
• Was not limited in time; and
• Failed to limit its definition for “disparagement” to the narrow circumstances set out in the1953  Supreme Court decision, NLRB v. Electrical Workers Local 1229 (Jefferson Standard Broadcasting Co.)

Significantly, the ruling applies regardless of whether the employee had already been terminated prior to receiving the severance agreement. Simply offering an agreement with such unlawful terms will violate the NLRA, even if the employee declines to sign the agreement, and even if the employer never seeks to enforce the terms.

This ruling reverses prior decisions that took into consideration other factors in determining whether an agreement violated the law. We expect McLaren Macomb to be challenged in the federal courts of appeals. 

What do employers need to do?

It behooves employers immediately to review the severance/separation agreements they use and to eliminate broad confidentiality and non-disparagement clauses. This does not mean that confidentiality goes out the window completely. Employers may still restrict employees from disclosing proprietary information and trade secrets in severance/separation agreements; and they may certainly enter into separate confidentiality or non-disclosure agreements that are not tied to the receipt of severance or separation pay. However, employers may not bar employees from discussing the terms of the severance/separation agreement with other employees—or anyone else, including on social media. 

Employers should also work closely with legal counsel to revise their existing severance/separation agreements to include language and/or carve-outs stating explicitly that nothing in the agreement is meant to restrict the employee’s rights under Section 7 of the NLRA, including contacting the Board. Additionally, severability clauses are now more important than ever, so that any challenge to a non-disparagement or confidentiality clause does not invalidate the most important component of the agreement, namely, the release.  It is also advisable for employers to advise employees specifically, in the agreement, that they are not restricted from discussing their employment or the terms of the severance/separation agreement with their co-workers, assisting other employees with filing a charge, or assisting in the Board’s investigative process. The more specific and conspicuous these disclaimers are, the better. 

Finally, though the new ruling applies to severance/separation agreements issued to non-management employees (with limited exceptions, managers and supervisors do not have rights under Section 7), employers should review their current managerial severance/separation agreements to ensure that there is no language that could be deemed to limit the manager’s ability to facilitate other employees who wish to exercise their rights under the NLRA. 

The information contained in this document does not constitute legal advice.

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