The U.S. Consumer Financial Protection Bureau (CFPB) cautioned employers in new guidance issued Oct. 24 about the use of artificial intelligence and algorithmic scoring to monitor and evaluate workers.
The agency warned that companies using third-party “digital tracking and opaque decision-making systems,” such as “black box” AI tools, must follow Fair Credit Reporting Act (FCRA) rules.
The FCRA, enacted in 1970, protects consumers from unfair credit reporting and is the fundamental law regulating employment screening, such as traditional background checks. The CFPB said it wishes to make clear that the FCRA’s protections apply to newer AI-based evaluation technologies, as well.
“Workers shouldn’t be subject to unchecked surveillance or have their careers determined by opaque third-party reports without basic protections,” said CFPB Director Rohit Chopra. “The kind of scoring and profiling we’ve long seen in credit markets is now creeping into employment and other aspects of our lives. Our action makes clear that long-standing consumer protections apply to these new domains just as they do to traditional credit reports.”
The tools in question include those that purport to assess and evaluate candidates and employees; monitor productivity; and predict employee behavior, including assessing the likelihood of workers engaging in union organizing or estimating the probability that a worker will quit.
Read the full article
AI-Based Worker Monitoring Must Comply with FCRA
SHRM | Oct 2024
Consumer Financial Protection Circular 2024-06
Consumer Financial Protection Bureau | Oct 2024
Articles
Employers must consider all the sources of data used to train the vendor’s AI tool, even if the data used to generate each individualized report only originates from the respective employee (or some or all of the employer’s other employees). For instance, if the AI tool generates a sales performance report based on the employee’s sales in comparison to or in consideration of public consumer data or public information about the employee, the vendor could be considered a consumer reporting agency.
AI and Other Decision-Making Tools: Does the Fair Credit Reporting Act Apply?
Jackson Lewis | Dec 2024
But, as articulated by the CFPB’s circular, the type of monitoring, assessments, or AI tools which may trigger an employer’s obligation to comply with FCRA include:
- Monitoring workers’ sales interactions;
- Tracking workers’ driving habits;
- Measuring the time that workers take to complete tasks;
- Recording the number of messages workers send and the quantity and duration of meetings they attend;
- Calculating workers’ time spent off-task through documenting their web browsing, taking screenshot of computers, and measuring key stroke frequency; and
- Analyzing worker data in order to provide reports containing assessment or scores of worker productivity or risk to employers, including automated recommendations or determinations relating to worker pay, predictions about worker behavior (including potential union organizing activity and likelihood that a worker will leave their job), scheduling shifts or job responsibilities, or issuing warnings or other disciplinary actions.
Employers and Vendors Have FCRA Obligations When Using Workplace AI Tools: Your Step-by-Step Compliance Guide
Fisher Phillips | Nov 2024
In reaching this conclusion, the CFPB’s circular, in a footnote, asserts its disagreement with guidance issued by the FTC in 2011 regarding the FCRA’s applicability to software. Specifically, in 2011, the FTC stated that “a seller of a software package that enables the purchaser to perform that task itself is not ‘assembling or evaluating’ the information and is thus not a CRA.” [3] In the circular, the CFPB distinguishes the inactive role played by software developers in 2011 with the “more active role” played by “software developers today,” who according to the circular provide “ongoing services to clients, such as by performing ongoing maintenance of the software, or by licensing services to clients instead of selling software as a point-in-time product.”
With this footnote, the CFPB seeks to bring under the ambit of the FCRA various companies that have historically not be subject to the CFPB’s authority.
CFPB Warns of FCRA Implications Associated with the Use of Workplace Tracking Technology
Morgan Lewis | Nov 2024
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