by The State of Colorado has enacted the first state law that regulates employer use of artificial intelligence (AI) in people management decisions. On May 17, 2024, the governor signed Colorado SB 24-205, a law that covers business use of AI in employment, housing, credit, education, and healthcare.
The law sets requirements for those developing and deploying AI systems that make or significantly influence what it defines as “consequential decisions.” These include decisions that have a material effect on hiring, promoting, or terminating employees.
Among the employment-related consequences of the new law are:
- Requiring employers doing business in Colorado to analyze and identify differential treatment or impact on various protected groups of the employer’s use of AI tools.
- Requiring employers to be transparent in how the AI tools gather and use data and to provide notices to applicants and employees regarding the use of AI tools.
- Creating a right to appeal adverse employment decisions that were influenced by AI tools.
- Creating a statutory tort liability for AI-enabled employment discrimination.
- Creating a mandatory risk management process for businesses, including employers, using AI tools to influence or make consumer-impacting decisions.
In signing the law, Colorado Governor Jared Polis acknowledged the business challenges created by the new law. He encouraged the bill’s sponsors to address business concerns before the law’s February 2026 effective date.
The AI boom of the past eighteen months led at least a dozen state legislatures to consider state laws protecting consumers from potential adverse outcomes of AI use in business this year. Some of these proposals, such as Colorado’s, were broad enough to encompass AI applications in the employment life cycle. As previously reported, federal agencies have recently issued statements and guidance documents pointing out that the use of AI tools in employment decisions is subject to existing federal nondiscrimination laws.
