Colorado made national headlines in 2024 by becoming the first state to enact a comprehensive law regulating high-risk artificial intelligence (AI) systems. The law immediately drew significant attention and criticism, from businesses and technology companies, prompting concerns about compliance burdens, uncertainty, and the potential impact on innovation. Following extensive stakeholder feedback, legislative debate, and ongoing legal challenges, Colorado has now substantially revised that framework through SB 26-189, replacing the original law before many of its core requirements took effect. 

Governor Polis signed SB-26-189 into law on May 14, 2026, and it takes effect January 1, 2027.  

Rather than regulating “high-risk AI systems,” the new law focuses on the use of automated decision-making technology (ADMT) in specified high-impact decisions. While the revised approach is narrower and less prescriptive than the original law, employers using AI to assist in making consequential employment-related decisions should not assume they fall outside the law’s revised scope.  

A few key definitions employers should keep in mind: 

• Automated Decision-Making Technology (ADMT). SB 26-189 defines ADMT as technology that processes personal data and uses computation to generate outputs such as predictions, recommendations, classifications, rankings, scores, or similar information that are used to make, guide, or assist decisions about an individual.  

• Consequential Decision. A consequential decision is defined as one that materially affects an individual’s access to, eligibility for, or opportunity regarding important areas of life, including employment. Employment decisions covered by the law include hiring, promotion, discipline, termination, compensation, and other decisions that materially affect employment opportunities.  

What Does It Mean? 

Colorado’s revised law reflects an important shift in AI regulation. Rather than abandoning AI oversight following significant business opposition, Colorado’s legislature chose to significantly narrow and simplify the original framework while preserving consumer transparency protections for AI-assisted consequential decisions. 

AI governance continues to grow in importance, particularly where AI tools influence employment decisions. Employers using resume screening tools, applicant ranking software, automated assessments, or other technologies that help make or influence employment decisions should understand when those tools qualify as ADMT under the new law and what obligations may apply. Employers should think broadly when evaluating these technologies.  

As AI use in the workplace becomes ubiquitous, employers should avoid assuming ADMT applies only to commercially available AI products designed specifically for human resources. Under the revised law, the analysis focuses on whether technology processes personal data and generates outputs that are used to make, guide, or assist consequential decisions, not on who developed the technology. As organizations and their employees increasingly move toward developing their own internal AI workflows, custom GPTs, AI agents, automated scoring models, or other AI-enabled processes using company-approved (or not approved!) AI tools, those internally developed solutions could potentially qualify as ADMT if they are used to influence consequential employment decisions. Employers should therefore evaluate both vendor-provided AI solutions and internally developed AI workflows, agents, applications, and other AI-enabled processes as part of their overall AI governance and compliance efforts. 

More broadly, Colorado’s experience illustrates how rapidly AI regulation continues to evolve. Even where states revisit or scale back earlier legislation, lawmakers continue to pursue frameworks governing the use of AI in consequential employment-related decisions rather than stepping away from regulation altogether. 

A few key next steps:  

• Inventory AI tools used throughout the employment lifecycle, including recruiting, hiring, promotion, performance management, and termination decisions. 

• Determine whether any AI tool – or the way an AI tool is being used – constitutes ADMT and whether it is used to materially influence consequential employment decisions under the statute. 

• Review vendor agreements and documentation to understand how AI tools function, what data they use, and what information vendors can provide to support compliance. 

• Strengthen AI governance practices by establishing internal review processes and documenting human oversight, and periodically reviewing new AI use cases developed within the organization. 

Colorado employers should review their I-9 and onboarding procedures following the enactment of HB26-1283, which creates new restrictions on how employers handle applicants’ and employees’ government-issued identification documents. The law took effect immediately upon Governor Polis’ signature on June 3, 2026, and establishes new notice requirements, strict limits on retaining identification documents, and significant penalties for violations. 

Under HB26-1283, employers generally may not require an applicant or employee, including migrant and seasonal workers, to surrender a government-issued identification document. Limited exceptions continue to apply for: 

• employment eligibility verification 

• document retention required or permitted by state or federal law; and  

• retention pursuant to a signed judicial warrant. 

The law also places new limits on the I-9 process. Employers may temporarily retain a government-issued identification document only for the time reasonably necessary to complete employment eligibility verification and make any required copies, but never for more than 10 hours. Employers may continue to retain copies of documents in their employment records where otherwise permitted. 

In addition to limiting when identification documents may be retained, the law creates a new notice obligation during the I-9 process. 

New Notice Requirement 

During the employment eligibility verification process, employers must provide applicants and employees with written notice explaining these protections. The notice must be provided in English and, when the employer knows the individual’s primary language is not English, in that primary language.  

Employers must also obtain a signed acknowledgment and retain both documents with their employment records. 

What Does it Mean? 

Although many employers already return identification documents immediately after completing the I-9 process, HB26-1283 formalizes those practices and adds new documentation requirements. Employers that use third-party onboarding vendors or staffing agencies should also confirm those providers are following the new procedures. 

Violations may result in criminal penalties and civil liability, underscoring the importance of compliant onboarding procedures. 

Because HB26-1283 took effect immediately, employers should consider the following steps: 

• Review I-9 and onboarding procedures to ensure identification documents are returned promptly and never retained longer than permitted. 

• Incorporate the required written notice and acknowledgment into your onboarding process, including translated versions where required. 

• Confirm staffing agencies, recruiters, and other onboarding partners are following these same procedures. 

Governor Gavin Newsom has signed Assembly Bill 2155 (AB 2155), aligning California’s Arbitration Act with the Federal Arbitration Act (FAA). Effective January 1, 2027, an arbitration agreement that would be unenforceable under the FAA will likewise be unenforceable under California law. 

What Does it Mean? 

AB 2155 does not prohibit employment arbitration agreements or change the rules for agreements that are enforceable under the FAA. Instead, beginning January 1, 2027, it eliminates the ability to enforce an arbitration agreement under the California Arbitration Act if that same agreement would be unenforceable under the FAA. In other words, California law will no longer provide an alternative path to compel arbitration when federal law would not. 

Most employment arbitration agreements are governed by the FAA because the threshold for FAA coverage is relatively easy to satisfy. The FAA applies to contracts involving interstate commerce, and courts have interpreted that requirement broadly. An employer does not need to conduct business in multiple states for the FAA to apply. Purchasing goods from out-of-state vendors, processing interstate payments, communicating across state lines, or otherwise engaging in interstate commerce is often enough to satisfy the FAA’s interstate commerce requirement. As a result, most California employers already rely on the FAA to enforce their employment arbitration agreements. 

Although the practical impact of AB 2155 will likely be limited for most employers, the new law serves as an important reminder to review existing arbitration agreements. Employers whose workers may fall outside the FAA’s coverage, such as certain transportation workers or other federally exempt workers, or whose agreements specifically rely on the California Arbitration Act, should work with counsel to confirm their arbitration program remains enforceable before the new law takes effect. 

Before AB 2155 takes effect January 1, 2027, employers should consider the following: 

• Review existing arbitration agreements to identify whether enforceability depends on the California Arbitration Act as opposed to the FAA. 

• Assess your workforce in consultation with legal counsel to determine whether any employee groups may fall within an FAA exemption or otherwise present enforceability concerns. 

• Update arbitration agreements and implementation practices as needed before the effective date to ensure they remain compliant with evolving federal and California law.