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Impending AI Laws: How to Approach Artificial Intelligence as a Small Business

 
How to Approach AI as a Small Business

By: Regina Dyerly, SHRBP, PHR

Partner/ Chief Operations Officer


The EU AI Act - Impending AI Laws: How to Approach Artificial Intelligence as a Small Business

Artificial Intelligence Laws Small Business

 

The rapid evolution of Artificial Intelligence (AI) is transforming industries, offering small to medium-sized businesses (SMBs) unprecedented opportunities for growth and efficiency. As AI technologies become increasingly integral to operations, the conversation around responsible AI governance is becoming more important. A primary example is the European Union’s (EU) “Artificial Intelligence Act.”


Man at computer with data

The recent approval of the EU AI Act, a comprehensive regulatory framework originating in Europe, extends implications beyond its legislative borders, prompting important considerations for American businesses. The act's distinctive approach to categorizing and regulating AI systems based on risk levels is likely to set a precedent for future laws beyond Europe, potentially influencing global standards and practices.


In the US, the EU AI Act emerges as a significant development to monitor, as it could signal broader shifts in global AI governance, thereby affecting how businesses worldwide may need to adapt in the future. For SMBs in the US, the EU AI Act can serve as a tool for informed decision-making when transitioning or implementing AI systems, offering the potential for a distinctive competitive advantage.


Overview of the EU AI Act

The EU AI Act introduces a nuanced framework to regulate AI technologies, categorizing them into four distinct risk levels: unacceptable, high, limited, and minimal risk, each subject to varying degrees of regulatory requirements. In the act, there are major implications regarding “Unacceptable” and “High-Risk” systems.

Unacceptable AI Applications

High-Risk AI Applications

Prohibited

Subject to Stringent Regulations

AI systems capable of:

  • Social Scoring (classification based on behavior/socio-economic status/characteristics)

  • Real-time biometric identification and categorization of people (i.e. facial recognition)

  • Behavior Manipulation of People & Vulnerable Groups (i.e. financial scams)

  • Healthcare and Safety

  • Education (i.e. exam/test scoring)

  • Transportation

  • Employment (i.e. resume sorting)

  • Public Services (i.e. loan approval)

  • Law Enforcement, Legal Interpretation/Application, and Migration

 

Compliance:

·        Strict risk mitigation systems

·        Use of high-quality data sets

·        Thorough documentation

·        Robust human oversight

·        Transparency, accountability, and ethical alignment

You can learn more about the EU Artificial Intelligence Act here: https://artificialintelligenceact.eu/high-level-summary/


The establishment of a new European AI Office to coordinate compliance and enforcement across the EU marks a significant step toward centralized AI regulation on a global scale. With steep penalties for non-compliance, the Act underscores the EU's commitment to responsible AI development and deployment.


Why Does this Matter to US Employers?

stressed man at computer next to bookshelf

The comprehensive approach of the EU AI Act sets a precedent that could shape future AI governance frameworks globally, including in the US. For American SMBs, staying informed about these developments is crucial, as they may herald broader shifts in AI regulation that could impact global business operations and innovation strategies.


What SMBs Need to Know

For small and medium-sized businesses (SMBs), especially those incorporating AI technologies in functions such as employment, HR, and other critical operations, it's crucial to stay informed about the evolving landscape of AI-focused legislation. Already, 12 states have enacted laws addressing AI use and accountability, with many others poised to follow. These regulations often scrutinize systems used by SMBs for recruitment, employee management, performance evaluations, and more. Given the rapid advancement of AI technologies and the anticipated surge in related legislation, SMBs need to proactively consider AI-focused strategies. By anticipating legal changes and adapting to AI legislation proactively, SMBs can secure a competitive edge.

Impact on HR and Employment Practices

AI tools used in recruitment and employee management must be transparent, unbiased, and include human oversight. This means SMBs must ensure that their AI-driven processes, from candidate screening to performance evaluations, are designed and implemented in compliance with these principles to avoid the risk of discriminatory outcomes or other ethical pitfalls. Notably, with AI regulations varying by state, it's wise to keep your recruitment staff in place, given the critical need for thorough oversight in managing high-risk AI activities.

Navigating Compliance Challenges

Compliance with the AI Act may require SMBs to review and potentially revamp their existing AI tools and systems. This might involve conducting impact assessments to understand how their use of AI affects individual rights, updating documentation to meet transparency requirements, and implementing more robust data governance practices.

Opportunities for Ethical AI Use

While the regulatory landscape may seem daunting, it also offers an opportunity for SMBs to differentiate themselves through ethical AI use. By embracing responsible AI practices, SMBs can build trust with their customers and employees, enhancing their brand reputation and competitive edge.


Practical Steps for SMBs

To align with the Act's requirements and ensure ethical AI use, SMBs can take several practical steps:


•	Conduct AI Audits: Regularly review AI systems to assess compliance with regulatory requirements and ethical standards. •	Enhance Transparency: Ensure that AI-driven decisions, particularly in HR and employment, are explainable and transparent to all stakeholders. •	Invest in Training: Equip your team with the knowledge and skills to implement and oversee ethical AI practices effectively. •	Engage in Continuous Learning: Stay informed about regulatory developments and best practices in AI governance to adapt proactively to the evolving landscape.

Understanding and adapting to the EU AI Act's requirements will not only help SMBs mitigate risks but also leverage AI technologies responsibly to drive innovation and growth. As the global conversation around AI regulation continues to evolve, staying ahead of these trends will be crucial for SMBs operating in an increasingly interconnected world.


 


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