Key Takeaways

  • Colorado employers that use artificial intelligence and similar automated tools in "significant" employment decisions, such as recruiting and pay-setting, must disclose their use of such tools, according to a measure signed by Governor Jared Polis on Thursday.amended state AI law.
  • Senate Bill 26-189 repeals the previous state law that was set to take effectin June. Its protections cover Colorado residents, individuals who have the opportunity to access or are eligible for opportunities in Colorado, and individuals whose significant decisions are evaluated by entities doing business in Colorado.
  • When an employer uses a covered tool and the tool's "substantial influence" results in an adverse outcome for an individual, the employer must provide, within 30 days of the decision, an explanation of the tool's role in the decision and other necessary disclosures. The law takes effect January 1, 2027, and applies to all decisions made on or after that date.

Deep Dive

Colorado's second attempt at AI legislation comes after months of debate and legal challenges surrounding its first attempt—Senate Bill 24-205—. State officials, including Polis, expressed a desire torevisit the original lawafter its passage, citing concerns about its potential impact on innovation and competition.

Several entities opposed SB 24-205, including Elon Musk's xAI, which last monthsued the Colorado Attorney Generalto block enforcement of the law. xAI specifically targeted the original law's requirement that organizations deploying AI tools take reasonable measures to avoid "algorithmic discrimination," arguing that the term was unconstitutionally vague.

SB 26-189 removes all references to "algorithmic discrimination" and redefines the technology intended to be regulated. The original SB 24-205 applied to "high-risk artificial intelligence systems," while the new law defines a broader category—"automated decision-making technology" (ADMT)—covering any tool that processes personal data and uses computation to generate output, including "predictions, recommendations, classifications, rankings, scores, or other information" used to "guide, direct, or assist" decisions about individuals.

SB 26-189 also lists several technologies excluded from the ADMT definition, and tools are generally excluded if they are not used to make significant decisions. Such decisions do not include "low-risk or routine decisions," which are those that do not materially affect eligibility, selection, rejection, compensation, or access to employment and similar opportunities.

The law clarifies that ADMT is not covered if it is used solely to aggregate, organize, or present information for human review and does not generate scores, rankings, recommendations, classifications, predictions, or other inferences that materially influence outcomes or decisions.

Individuals who suffer adverse outcomes due to significant decisions made by ADMT may request an explanation of the personal data collected about them and correction of personal data that is factually erroneous or materially inaccurate and used in the decision. They may also formally request a "meaningful human review and reconsideration" of the decision.

SB 26-189 provides that the Colorado Attorney General will issue regulations to clarify and implement the requirements before the 2027 effective date. If the Attorney General determines a violation has occurred, organizations deploying ADMT will have a 60-day cure period (where feasible) before the Attorney General may bring legal action. If the organization is found to have knowingly or repeatedly violated the law, the Attorney General may waive the cure period requirement.

In a press release,Polis said the new lawrepresents a collaborative effort among consumers and other multi-stakeholder interests and will preserve Colorado's position in the rapidly evolving AI industry.

"This is a major step forward for Colorado and a model for the rest of the country," Polis said in the release. "Replacing the old law that never took effect will promote innovation and entrepreneurship in Colorado."

The news comes days after the state legislature passed another bill prohibiting employers from discriminating against employees bysetting individualized wages using AI or similar tools.

In an analysis of SB 26-189's passage, attorneys at Fisher Phillips noted that affectedemployers should review their AI toolsand engage with vendors. The attorneys also advised employers to be aware of the law's three-year recordkeeping requirement for related compliance documents and to monitor pending legal challenges to the revised law.