EEOC Issues Guidance on Software, Algorithms, and AI in Employee Selection

By: Dave Schmidt and Bre Timko

On May 18, 2023, the Equal Employment Opportunity Commission (EEOC) published a press release in which they link to new guidance they have provided on the use of artificial intelligence (AI) in selection procedures. This adds to prior guidance the EEOC has provided related to the use of these algorithmically-driven tools for individuals with disabilities

The latest guidance from the EEOC is focused on disparate impact under Title VII. The guidance takes the form of Questions and Answers, preceded by sections that provide background context (e.g., definitions of key terms, relevant elements of Title VII). There are a total of seven questions addressed by the EEOC:

  1. Could an employer’s use of an algorithmic decision-making tool be a “selection procedure”?
  2. Can employers assess their use of an algorithmic decision-making tool for adverse impact in the same way that they assess more traditional selection procedures for adverse impact?
  3. Is an employer responsible under Title VII for its use of algorithmic decision-making tools even if the tools are designed or administered by another entity, such as a software vendor?
  4. What is a “selection rate”?
  5. What is the “four-fifths rule”?
  6. Does compliance with the four-fifths rule guarantee that a particular employment procedure does not have an adverse impact for purposes of Title VII?
  7. If an employer discovers that the use of an algorithmic decision-making tool would have an adverse impact, may it adjust the tool, or decide to use a different tool, in order to reduce or eliminate that impact?

The background context and answers to the questions are consistent with legacy standards for considering adverse impact as it relates to selection procedures. The standard legal framework for evaluating selection tools, be they traditional assessments or assessments that use cutting-edge methodologies, applies. The EEOC noted that this guidance was specifically focused on adverse impact and not on validity, but it is still the case that both need to be considered—Industrial and Organizational Psychologists are particularly well-suited to help organizations and assessment developers evaluate both and strike this balance.

The EEOC states that, “[t]he information in this document is not new policy; rather, this document applies principles already established in the Title VII statutory provisions as well as previously issued guidance.” That said, this guidance requires less than 30 minutes to read and is well worth the time to review. This publication highlights that, while much attention is being drawn by non-federal laws in this area (e.g., NYC Local Law 144), the federal agencies are increasingly focused on this area, and this trend is expected to continue.

Stay tuned to the DCI blogs for regular updates on what is happening with laws and regulations related to the use of algorithmically-driven assessments in employee selection.

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