AI-powered applicant tracking and resume screening tools have become standard even for small employers — and several states now attach real legal obligations to using them, with enforcement mechanisms ranging from a regulator's website to some of the largest privacy settlements in the country.
New York City's Rule Applies Based on the Job, Not Your Address
NYC Local Law 144 covers any automated employment decision tool used to screen candidates or employees for NYC-based positions — and the detail almost everyone gets wrong is that it applies based on where the position is located, not where your company is headquartered. A business based anywhere in the country using an AI screening tool for a single New York City-based role is potentially in scope, with no small-business size exemption. If it applies, you need an independent bias audit of the tool within one year before use, a published summary of the results, and notice to candidates that an automated tool is being used, along with how to request an alternative process.
Illinois Runs Three Separate Laws, Not One
Illinois regulates AI in employment through three overlapping statutes, and treating ‘Illinois’ as a single law is the most common mistake employers make there. The AI Video Interview Act covers specifically video-interview analysis, requiring notice, an explanation of what is evaluated, consent before analysis, and destruction of recordings within 30 days of a request. Separately, HB 3773 covers any AI used in an employment decision generally, including using ZIP code as a proxy for a protected characteristic, and creates a substantive duty not to produce a discriminatory effect — not just a documentation requirement.
The Biometric Trap Inside Video Interviews
Illinois's Biometric Information Privacy Act applies independently to any tool processing facial geometry or voiceprints — which includes many AI video-interview tools, confirmed by a federal court in Deyerler v. HireVue. This is the trap: a video-interview tool can trigger both the Video Interview Act and BIPA simultaneously, requiring two separate consent processes, not one. BIPA carries a private right of action with statutory damages of $1,000 per negligent violation and $5,000 per willful violation, and has produced some of the largest AI-related settlements in the country — including a $51.75 million settlement against Clearview AI and a $47.5 million settlement against another technology company, both over facial recognition data collected without proper consent.
What to Actually Do
Identify whether any hiring tool you use analyzes video, voice, or biometric data, and check the specific location of every role it screens for, not just your own company's home state. Where biometric data is involved, obtain compliant notice and consent as two separate processes if both a video-interview law and a biometric law apply. None of these statutes offers a general small-business exemption — a company of any size using a qualifying tool for even one covered role is in scope.
Where to Go From Here
AI Compliance for Small Business covers Illinois, New York, and every other state's AI employment rules in full, plus the federal anti-discrimination law that applies regardless of which state-specific statute governs your situation.
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This article is for educational and informational purposes only and does not constitute legal advice. State AI employment laws are changing rapidly — confirm current requirements for your specific state with a qualified attorney.