AI’s Power to Replace Workers Faces New Scrutiny, Starting in NY

New York Gov. Kathy Hochul is offering a solution to secrecy around AI-fueled layoffs, even as employers’ potential reluctance to admit when the technology causes job cuts poses an obstacle to the policy’s success.

Under a plan Hochul announced this week, New York will be the first state in the nation to use its Worker Adjustment and Retraining Notification (WARN) law to require that employers disclose when mass layoffs are related to their adoption of AI.

Corporate executives and investors are generally bullish on the prospects for artificial intelligence tools to improve profitability and productivity. But knowing the extent to which workers are being replaced currently depends largely on anecdotal evidence and speculation.

The policy change from Hochul (D) “is trying to get some sort of a handle on what’s going on behind the scenes so they can better understand the economic impact, positive or negative, of AI,” said Michael Jakowsky, an employment attorney with Jackson Lewis PC in New York.

What’s ultimately required of employers will depend on how the state Department of Labor rolls out the change, Jakowsky said. New York already requests ample information from employers providing WARN notices about upcoming mass layoffs.

The state DOL has no set timeline for implementing the new requirement, Labor Commissioner Roberta Reardon told Bloomberg Law. She acknowledged defining what counts as an AI-related layoff would be a challenge.

“It gives us data that we really, really need, and that’s coming from the employer, not just somebody making it up,” Reardon said. “We can take that data and we can talk to workers about: How do I upskill around this area where the AI is coming in?”

Transparency Focus

Other states have tinkered with proposals over the last two years to protect workers from widespread job losses as more businesses adopt generative AI and similar technologies, passing a few that narrowly targeted specific job types such as actors and musicians in California, Illinois, New York, and Tennessee. More aggressive proposals such as a New York “robot tax” bill haven’t found traction.

Transparency-focused policies such as Hochul’s proposal could be a good first step for states looking to manage the risk of worker displacement, said Kevin Frazier, a legal scholar in emerging technology at St. Thomas University College of Law and adjunct professor at Delaware Law.

Frazier’s research on AI and the workforce includes calling for similar state expansions, as well as to the federal WARN Act, which dates to 1988.

Despite the nod to displaced workers, Hochul and her counterparts in many states have talked up the economic potential of AI and devoted resources to attracting technology jobs, such as with New York’s $400 million Empire AI consortium.

AI is forecast to drive $320 billion in economic growth for New York by 2038, Hochul said in her State of the State Address Jan. 14. She released the WARN Act requirement on AI-related layoffs in conjunction with the speech. Bloomberg Law first reported Hochul’s policy change Jan. 14.

Using the WARN Act to track AI-related layoffs has potential shortcomings, Frazier said, including that it only covers mass layoffs and that its effectiveness depends on employers determining and accurately reporting whether a layoff was AI-related.

“What does it mean for a job loss to be caused by AI? We’re suffering with some of these foundational questions of: How do you point to a single job and say this job loss was caused by AI,” rather than market conditions or other factors, he said.

Public Pressure

The WARN Act’s focus on mass layoffs, rather than smaller cuts, also could limit the effectiveness of New York’s policy.

To trigger the federal WARN Act notice requirements, employers with 100 or more employees must be laying off at least 50 at a single work site. New York is one of several states with stricter requirements. It calls for WARN notice whenever an employer with 50 or more employees plans to lay off at least 25 people accounting for at least a third of the workforce at a single location.

The federal WARN Act requires large employers to give 60 days’ notice to their employees and state and local officials, but it doesn’t require they report any reason for the layoffs.

Other states have tried to get a better grasp on AI’s impact on the workforce via research, such as in task force studies ordered in New Jersey and Pennsylvania and funding in Oregon’s budget for university research.

New York Labor Department has one of the most thorough WARN adjudication divisions of any state, alongside California and Illinois, Jakowsky said. New York DOL staff frequently reach out to employers who have filed WARN notices for more information or in some cases to audit them, he said.

This aggressive enforcement could help dissuade employers from concealing that a layoff was AI-related or claiming a more innocuous-sounding reason such as cost-cutting, according to Felice Ekelman, also a New York employment attorney with Jackson Lewis.

“Presumably they could interview the affected employees” to find out if the layoff resulted from adoption of AI tools, she said.

Beyond data collection, the New York proposal also could put public pressure on businesses to minimize layoffs, including by training employees for new roles as technology takes over their current tasks, said Mark Girouard, an employment attorney with Nilan Johnson Lewis PA in Minnesota.

“Given the fact that this regulation will be putting a spotlight on the role of AI in displacing workers, it would behoove employers to make affirmative efforts around retraining and reskilling to try to reduce the impact,” he said.