Colorado’s New AI Law: What Employers Need to Know
- Regina Dyerly, SHRBP, PHR
- Oct 1
- 4 min read
Colorado’s New AI Law: What Employers Need to Know
By: Regina Dyerly, SHRBP, PHR | Partner / Chief Operating Officer (COO)
Artificial intelligence is moving quickly from hype to reality in the workplace. Employers are experimenting with AI in many ways, but in Colorado, one fact is now clear: AI cannot be used to make employment decisions without human oversight.
In 2024, the state passed Senate Bill 205, the nation’s first broad law regulating artificial intelligence. While the effective date was recently delayed from February to June 30, 2026, the core requirement has not changed. Employers are still responsible for ensuring that AI tools do not result in discrimination or unfair practices.
This law reflects what many HR leaders already know: AI can be a helpful tool, but it cannot replace the judgment, accountability, and context required for employment decisions.
What the Law Requires
Colorado’s AI law applies to what it calls “consequential decisions” which are those with a material effect on employment, housing, health care, and other key services. In the workplace, this means decisions about hiring, promotions, pay, and disciplinary actions.
Key employer responsibilities under the law include:
Risk management policies governing the use of AI.
Impact assessments to evaluate whether the AI tool could create discrimination.
Documentation to show oversight and accountability.
Human review of decisions where AI is a factor.
The Message is Clear:
Businesses cannot delegate employment decisions to software. Employers remain accountable.
Microsoft’s Take: Human-Centered AI
Christopher J. Fernandez, Chief HR AI Officer and Corporate Vice President, Human Resources at Microsoft, has described their approach as human-centered AI: routine tasks are automated, creative tasks are augmented, and empathetic tasks are deliberately kept human. This framing reinforces Colorado’s stance, AI can support HR work, but cannot replace human judgment in areas that affect people’s livelihoods and well-being.
Even with this careful design, AI tools can still create discrimination risk if unchecked. Oversight is not optional: employers should document how AI is used, maintain human review for any decision affecting employment, and preserve clear lines of accountability.
The Limited Role of AI in HR
Many employers already use software that incorporates some form of AI, often behind the scenes. These tools can be useful for processing information quickly or automating routine administrative steps. But usefulness does not equal decision-making.
Even in these limited applications, accuracy and oversight are non-negotiable. AI systems are impressive in speed and scale, but they are not flawless. They sometimes generate outdated or incorrect information, and without oversight, they may reinforce bias instead of reducing it. And they cannot interpret the cultural, interpersonal, and compliance nuances that shape the workplace.
Even Well-Designed Tools Can Be Confidently Wrong
Recent examples of this phenomenon include misnaming federal or state proposals (one tool called OBBBA the “Omnibus Budget and Benefits Bill”), citing outdated salary thresholds as if they were current, and inventing notice or poster requirements that do not exist. These slips may be amusing in research, but they are dangerous in compliance. This is why Colorado’s law keeps accountability with employers. AI can draft, but people must verify.
A single error in a compliance context, or an overlooked nuance in an employee matter, can create outsized risks. Colorado’s AI law reinforces this point: efficiency gains are acceptable, but accountability always remains with the employer.
AI’s strength lies in processing massive amounts of data quickly, something no HR team could do alone. That efficiency can be a real advantage. But decisions about people require more than speed. They require judgment, empathy, and accountability, and that is where the human element remains essential.
What Employers Should Never Leave to AI
Even with the delayed compliance deadline, employers can begin by identifying areas where AI should not be relied on, not now, and not in 2026. Specifically, employers should never leave AI in charge of:
Making hiring or promotion decisions. Final reviews and selections must always involve human oversight.
Handling employee relations issues such as investigations, performance management, or discipline.
Interpreting employment laws or regulations. AI may provide outdated or inaccurate information.
Communicating sensitive messages such as terminations, accommodations, or leave approvals.
Assessing employee performance without context. The risks of bias and misinterpretation are high.
Each of these areas involves compliance exposure, legal accountability, and human judgment that cannot be automated. The new law exists precisely to keep responsibility where it belongs: with employers.
Preparing for 2026
The delay to June 2026 provides a window of opportunity for employers to prepare. Practical steps include:
Take inventory of where AI is already present in your systems.
Evaluate vendors to ensure their tools meet upcoming compliance requirements.
Update policies to reflect how AI will be used, and how human oversight is maintained.
Train managers and HR staff on the benefits and risks of AI in the workplace.
Document decisions to demonstrate compliance if questions arise later.
Starting now reduces the risk of scrambling to adjust as the deadline approaches.
The Human Element Remains Essential
Beyond compliance, there is a larger truth: HR is about people. Employees want accurate answers, fair treatment, and empathy in difficult situations. They want to be heard, not processed.
AI may be able to accelerate some tasks, but it cannot replace human connection, context, or accountability. The most effective workplaces will use AI carefully, as a powerful support tool, not a decision-maker.
Colorado’s new AI law is not just a regulation to track. It is a reminder that technology should support, not replace, the human side of work. Employers who embrace AI responsibly, with the right policies, safeguards, and oversight, will be positioned for success. Those who do not may find themselves facing compliance risks, reputational damage, and employee mistrust.
Now is the time to prepare. AI may assist, but employers remain accountable. And in HR, accuracy, fairness, and humanity are non-negotiable.
Colorado’s New AI Law: What Employers Need to Know
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