Colorado Enacts AI Law

Colorado has enacted legislation to regulate artificial intelligence, adding requirements to avoid discrimination. The new law, SB 205, takes effect in 2026.

We’ve gathered articles on the news from SHRM Online and other outlets.

‘High-Risk’ AI Systems Targeted

The law adds requirements for developers of “high-risk” AI systems to “use reasonable care to avoid algorithmic discrimination.” The law will also require AI developers and deployers to disclose information about the systems to regulators and the public and complete impact assessments of such systems. Gov. Jared Polis said he had “reservations” while signing the bill and encouraged lawmakers to improve upon the legislation before it goes into effect.

Colorado is not alone in advancing AI regulation. Colorado joins the U.S. Equal Employment Opportunity Commission’s technical assistance documents, the U.S. Department of Labor’s (DOL's) recent pronouncement, New York City’s automated employment decision tools law, Tennessee’s regulation of deepfakes, Illinois’ Artificial Intelligence Video Interview Act, Maryland’s facial recognition law, and the European Union’s AI Act.

(The Hill and Jackson Lewis)

Definition of ‘High-Risk’ AI Systems

Colorado’s SB 205 defines “high-risk artificial intelligence systems” as machine-based algorithms that significantly influence decisions in areas including employment and employment opportunities. These AI systems are considered high risk if they make or substantially contribute to consequential decisions impacting individuals or groups, potentially leading to differential treatment based on protected classifications such as age, disability, race, religion, or sex. Small businesses with fewer than 50 full-time employees may be exempt from some of the law’s requirements.

(Forbes)

Affected Employment Practices

SB 205 establishes requirements for both developers and deployers of high-risk AI systems. Notably, the law’s definition of “consequential decisions” in the employment context broadly includes decisions that have a “material legal or similarly significant effect on the provision or denial to any consumer of ... employment or an employment opportunity.” This language potentially opens the door to a wide range of employment practices beyond hiring, promotion, or termination, such as claims related to performance management, discipline, or even workplace surveillance.

(Seyfarth)

Required Compliance Steps

While several other jurisdictions have enacted laws regulating aspects of AI use by businesses, Colorado is the first state that would directly and broadly establish a duty of reasonable care in the development and deployment of AI tools across hiring, employment, and various consumer service sectors. Once SB 205 goes into effect, most employers that use a covered AI tool will be required to take comprehensive compliance steps by Feb. 1, 2026. These steps would include implementing an AI risk management policy and program, conducting impact assessments of the AI tool, and providing detailed notices.

(Littler)

White House’s AI Principles

The White House has issued eight principles, developed by the DOL, for protecting workers from the risks of AI. One of the White House principles is the protection of labor and employment rights. AI systems should not violate or undermine workers’ right to organize, health and safety rights, wage and hour rights, or anti-discrimination and anti-retaliation protections.

(SHRM Online)