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When the Colorado AI Act was first passed, Governor Jared Polis signed it with the unusual caveat that the law would need to be amended before it went into effect in February 2026. Lawmakers anticipated that additional time would be necessary to refine definitions, clarify employer obligations, and address concerns from both the business community and consumer advocates. However, on August 28, 2025, Governor Polis signed SB25B-004, which officially delayed the Act’s effective date to June 30, 2026. The delay came after a special legislative session where lawmakers were unable to reach a consensus on substantive reforms. By extending the timeline, the legislature signaled that the details of how to balance innovation, fairness, and the purpose of the Act remain unsettled.

What the Colorado AI Act Does for Employers

The Colorado AI Act is among the first state laws in the nation designed to directly regulate artificial intelligence in the workplace. Its current form is not final, and lawmakers are expected to make further adjustments, although the scope and direction of those changes remain uncertain. While the Act also applies to sectors beyond employment, for employers, the core obligations fall into three main areas:

• High-Risk AI Systems. Employers who use AI tools for “high-risk” employment decisions, such as hiring, promotions, discipline, or termination, will be subject to the Act’s requirements. The Act defines a “high-risk” AI system as one that makes, or is a substantial factor in making, a consequential decision that materially impacts an individual’s employment. In practical terms, this means not every AI tool will be covered. For example, automated spelling or grammar checkers would not qualify, but tools used to score resumes, assess video interviews, or rank candidates for promotion likely would.

• Notice and Transparency. If the employer is covered under the Act, employees and applicants must be informed when a covered AI is used in making significant decisions about them. That notice must include an explanation of the tool’s role and the individual’s right to request more information.

• Risk Management and Bias Testing. Covered employers will be expected to implement documented risk management programs and conduct regular testing to evaluate whether AI systems produce discriminatory outcomes. If bias is found, corrective action will be required.

Enforcement and Penalties
The Colorado Attorney General will be responsible for enforcement. Employers that fail to comply may face civil penalties and public enforcement actions brought by the AG’s office. The current law does not create a private right of action, meaning employees cannot sue directly under the Act.

Interaction with Federal and Other State Laws
The Colorado AI Act is not the only law that impacts AI use. At the federal level, the Equal Employment Opportunity Commission (EEOC) has already issued guidance warning employers that AI-driven tools can create discriminatory outcomes under Title VII. Other states, such as California and Connecticut, are also exploring their own AI regulations. Employers with a multistate workforce will need to monitor this patchwork of laws to ensure their practices meet both state and federal requirements.

Why It Should Still Be on Your Radar

Even with the delayed effective date and the potential for further delays, the Act is not something employers can afford to ignore. Implementing AI compliance programs is a complex task. Many organizations will need to audit multiple systems, coordinate with outside vendors, and train staff across different departments. Waiting until mid-2026 to start that process could leave employers scrambling and exposed to risk if the law is amended but still takes effect on short notice. Early preparation also helps build internal alignment, ensures vendors are on the same page, and demonstrates to employees and applicants that the organization values fairness and transparency. Employers should begin now by:

• Auditing AI Use. Make an inventory of any AI-driven systems used in recruiting, employee evaluation, or day-to-day HR functions.

• Engaging Vendors. If third-party tools are in play, ask vendors about their bias testing protocols, data handling practices, and whether they are preparing for compliance.

• Updating Policies and Training. Supervisors and HR professionals need guidance on how to provide required notices, handle employee requests for more information, and document compliance efforts.

• Watching for Changes. The legislature may still modify the Act before June 2026. It also may be delayed further. Staying plugged in now will prevent last-minute scrambles later. Employers Council will keep you updated with any developments.

The Bottom Line

The Colorado AI Act may not take effect until mid-2026, but employers who delay preparation risk both compliance headaches and employee relations issues. Getting ahead now means you’ll be ready when the law finally arrives, and you may even build trust with your workforce by demonstrating a commitment to fairness and responsible AI use before the law requires it.

To learn more, Employers Council offers AI resources, including our Employers Guide to Managing AI in the Workplace and our sample policy, Use of Content-Generating AI Software.  If you have any questions or need further assistance, please contact us at info@employerscouncil.org.    

Mark Decker is an attorney with Employers Council.