As the federal government is pursuing a more laissez-faire approach to AI regulation, the states are picking up the slack. The two most recent states with AI regulations are Colorado and Connecticut. 

Colorado

On May 17, 2024, Colorado’s governor signed the Artificial Intelligence Act, Senate Bill (SB) 24-205.  This law was built on the European Union’s AI regulations which were more on the Consumer Protection side.  The law was supposed to be effective as of February 1, 2026, but implementation was delayed for the Colorado legislature to pass a more practical law that could be enforced. "What was passed two years ago, Senate Bill 205, would have a chilling effect on attracting tech businesses to Colorado, and actually ran some off, because it messages that Colorado is not open for business," said Senate Minority Leader Lisa Frizell.

The original law was very broad and applied beyond the scope of basic employment practices.  It applied to developers and deployers of “high-risk” AI systems. High-risk AI systems are ones that can make or significantly influence “consequential decisions” in areas such as employment, housing, credit, education, and healthcare. “Consequential decisions” in the employment context is broadly defined and includes decisions that have a “material legal or similarly significant effect on the provision or denial to any consumer of … employment or an employment opportunity.”  Potentially, as one commentator stated, this law could lead to claims in performance management, disciplinary action, or even workplace surveillance.  This law was also broadly interpreted to cover not only applicants and employees, but Colorado consumers in the normal sense of the word definition.  

The new law was introduced to replace the previous law after all the uproar.  This law is more focused and simpler – targeting notification when AI is being used.  Specifically, the law was passed with bipartisan support and works to prevent algorithmic discrimination by including a mandate to notify an individual when AI is being used in "consequential decisions" such as employment, healthcare, and housing. 

This new law is broader.  It is not limited to artificial intelligence, which is generally defined to include some inferential step. Rather, “automated decision-making technology” is defined to include any “technology that processes personal data and uses computation to generate output….” This definition covers a broad range of computational technologies, many of which have been used by employers long before the recent explosion of artificial intelligence tools.

This law specifically requires three actions by employers: (1) provide notice before using Covered ADMT, (2) implement a robust adverse action process, including notice, a right to correct, and a right to meaningful human review, and (3) retain records about the use of Covered ADMT for three years.
Finally, the law requires the following after making an adverse decision materially influenced by a Covered ADMT’s output.  Within 30 days of the decision, the employer must provide a notice that includes:

• A plain language description of the consequential decision and the role the Covered ADMT played in that decision;
• Instructions and a simple process to request additional information about the Covered ADMT and the inputs, including the name of the Covered ADMT, the Covered ADMT version number, if applicable, the Covered ADMT developer, and the types, categories, and sources of personal data used; and
• An explanation of the right to correct and review, as well as how to exercise these rights.

Violations are classified as deceptive trade practices under the Colorado Consumer Protection Act. The bill empowers not just the Attorney General and district attorneys to seek civil penalties, but it also establishes a private right of action, exposing companies to class-action litigation risk. 

Connecticut

On May 11, 2026, the governor signed into law Public Act No. 26-12, an omnibus bill.  The law includes pay transparency requiring employers to disclose wage ranges to job applicants upon hiring, change of position, or request. It also requires a general description of benefits in all job postings when a job offer is made or salary discussions arise. 

The law also includes a Synthetic Media Transparency provision which requires transparency obligations on developers of AI systems or models capable of generating “synthetic digital content,” including AI-generated audio, images, text, or video. By October 1, 2027, such developers must ensure that such content is marked and detectable as such.  This law is a step to fight deepfakes.

Specific to AI in employment decisions, the law covers “automated employment-related decision process” (AEDP), a computational process that generates any output that “(i) affects the outcome of an employment-related decision, and (ii) is not a de minimis factor that is relied upon in making, or in determining the material terms of, an employment-related decision.” The operative provisions take effect on October 1, 2027.

Before any such employment-related decision is made, deployers must:

• Provide to such employee or applicant a written notice disclosing the AEDP’s use, its purpose, the nature of the decision, and the right to opt out of personal data processing per state law; and
• If such employment-related decision “is adverse” to such employees or applicants, provide them with a high-level statement disclosing the principal reason(s) for the decision, including “the degree to which, and manner in which,” the AEDP output contributed to the decision, the type and source of data processed by the AEDP, and rights to examine and correct any data they did not provide to the deployer.

Violations of the AEDP provisions are treated as unfair or deceptive acts or practices under Connecticut’s consumer protection law (which could lead to large damages) and brought by the Attorney General.

HR needs to be vigilant on recruitment and use of AI.  Michigan has yet to follow suit, though the upcoming fall election may push AI and pay transparency to the top of the state's legislative agenda.

Source: Littler 5/15/26, CBS News 5/15/26, Baker Potts 5/12/26, JD Supra 5/12/26, DL Piper 5/7/26