Colorado passes AI law

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

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Targeted “high-risk” AI systems

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 to complete impact assessments of such systems. Govt. Jared Polis said he had “reservations” about signing the bill and encouraged lawmakers to improve 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) recent statement, the New York City Automated Employment Decision Making Tools Act, Tennessee’s Deepfakes regulation, Illinois’ Artificial Intelligence Video Interview Act, Maryland’s facial recognition law, and the European Union’s AI Act.

(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 artificial intelligence systems are considered high risk if they make or substantially contribute to important decisions affecting individuals or groups, potentially leading to differential treatment based on protected classifications such as age, disability, race, religion or gender . 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 sets forth requirements for both developers and deployers of high-risk AI systems. Notably, the Act’s definition of “consequential decisions” in the employment context broadly includes decisions that have a “material or similarly significant legal effect on providing or denying any consumer … employment or an opportunity for employment.” 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 supervision.

(Seyfarth)

Required Compliance Steps

While several other jurisdictions have passed laws regulating aspects of AI use by businesses, Colorado is the first state to directly and broadly impose a duty of reasonable care on the development and deployment of AI tools in the employment, employment and sectors different customer service. Once SB 205 goes into effect, most employers using a covered AI tool will be required to take full compliance steps by February. 1, 2026. These steps will include implementing an AI risk management policy and program, conducting AI tool impact assessments, and providing detailed notifications.

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White House AI Principles

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

(SHRM Online)