Colorado Enacts Law Establishing Guardrails Against Discrimination From AI Use

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The law expressly requires a deployer of a "high-risk AI system" to use reasonable care to protect individuals from any known or reasonably foreseeable risks of "algorithmic discrimination."

Colorado has enacted legislation that establishes guardrails against discrimination for employers that deploy certain artificial intelligence (AI) systems. The law (Senate Bill 24-205) takes effect February 1, 2026.

The Details

Effective February 1, 2026, Senate Bill 24-205 covers the use of AI in several contexts including employment, education, lending, healthcare, housing and other services. The law classifies certain uses of AI in the workplace as high-risk and imposes obligations on how employers use and monitor AI systems, along with specific disclosure and reporting requirements.

The law expressly requires a deployer of a "high-risk AI system" to use reasonable care to protect individuals from any known or reasonably foreseeable risks of "algorithmic discrimination."

Under the law, reasonable care includes, but is not limited to:

  • Implementing a risk management policy and program;
  • Completing an impact assessment at least annually;
  • Annually reviewing each high-risk AI system to ensure that it isn't causing algorithmic discrimination;
  • Posting a statement on the employer's website summarizing the types of high-risk systems deployed, along with how any known or reasonably foreseeable risks of algorithmic discrimination are managed, and the nature, source, and extent of the information collected and used by the deployer;
  • Notifying individuals that the high-risk AI system is used to make, or is a substantial factor in making, a consequential decision before the decision is made;
  • Furnishing a notice if the system makes a consequential decision that is adverse to the individual;
  • Disclosing to the Colorado Attorney General the discovery of AI-based algorithmic discrimination within 90 days after the discovery.

See the text of the law for details on each of these provisions.

If employers have fewer than 50 employees and don't use their own data to train the AI system, they are exempt from these three provisions:

  1. Implementing a risk management policy and program.
  2. Completing an impact assessment.
  3. Posting a statement on their website.

The law also includes standards for developers of high-risk AI systems. See the text of the law for details.

Key Definitions

The law defines "algorithmic discrimination" as a condition in which the use of an AI system results in an unlawful differential treatment or impact that disfavors an individual or group of individuals on the basis of their actual or perceived: age, color, disability, ethnicity, genetic information, limited proficiency in the English language, national origin, race, religion, reproductive health, sex, veteran status or other classification protected under the laws of Colorado or federal law.

"High-risk AI systems" are defined as those that make, or are a substantial factor in making, a consequential decision.

Under the law, a "consequential decision" in the employment context is one that has a significant impact on employment or an employment opportunity, such as a hiring, promotion, or termination decision.

Next Steps

Colorado employers should:

  • Review the law in full to help establish the responsible use of AI at work.
  • Establish a team to review AI guidelines and develop company specific rules.
  • Comply with the standards for demonstrating reasonable care by February 1, 2026.
  • Consult legal counsel as needed.

ADP Compliance Resources

ADP maintains a staff of dedicated professionals who carefully monitor federal and state legislative and regulatory measures affecting employment-related human resource, payroll, tax and benefits administration, and help ensure that ADP systems are updated as relevant laws evolve. For the latest on how federal and state tax law changes may impact your business, visit the ADP Eye on Washington Web page located at www.adp.com/regulatorynews.

ADP is committed to assisting businesses with increased compliance requirements resulting from rapidly evolving legislation. Our goal is to help minimize your administrative burden across the entire spectrum of employment-related payroll, tax, HR and benefits, so that you can focus on running your business. This information is provided as a courtesy to assist in your understanding of the impact of certain regulatory requirements and should not be construed as tax or legal advice. Such information is by nature subject to revision and may not be the most current information available. ADP encourages readers to consult with appropriate legal and/or tax advisors. Please be advised that calls to and from ADP may be monitored or recorded.

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Updated on June 7, 2024