On May 17, 2024, Colorado Governor Jared Polis signed Senate Bill 24-205 (“SB205”) into law, which has significant implications for the use of AI in hiring.
The new law will take effect on February 1, 2026, and regulate how employers use “high-risk” AI systems to make hiring decisions, including candidate screening and resume software.
But what does this mean for Colorado employers?
This article will discuss the implications of Colorado SB205 and AI in hiring, specifically regarding employers.
Background: SB205
Colorado Senate Bill 24-205 (SB205) was codified to address growing concerns about the use of high-risk AI technology in employment practices.
As artificial intelligence technologies mature, their applications in the hiring process proliferate.
For example, some employers use artificial intelligence to automatically screen resumes or pre-interview chatbots to streamline much of the work hiring managers perform.
While these tools have advantages, they can also magnify issues like fairness, transparency, and discrimination in the hiring process.
SB205 is meant to address many of these issues.
What are ‘High-Risk’ Systems?
Before we discuss the critical provisions of SB205, it’s important to define a key term used in the act: high-risk systems.
SB205 does not limit the use of all AI systems in hiring. Instead, it regulates the use of high-risk systems.
As defined in the act, this refers to “any artificial intelligence system that, when deployed, makes, or is a substantial factor in making, a consequential decision.”
What is Not Included
It does not include an AI system if the artificial intelligence system is intended to:
- Perform a narrow procedural task such as transforming unstructured data into structured data
- Detect decision-making patterns or deviations from prior decision-making patterns
Further, the act “is not intended to replace or influence a previously completed human assessment without sufficient human review.”
It also does not include certain technologies unless they play a significant role in making consequential hiring decisions.
These are the anti-fraud technologies that do not use facial recognition technology:
- Anti-malware
- Anti-virus
- Artificial intelligence-enabled video games
- Calculators
- Cybersecurity
- Databases
- Data storage
- Firewall
- Internet domain registration
- Internet website loading
- Networking
- Spam- and robocall-filtering
What is Included
Instead, ‘high-risk’ in this context refers to AI technology that might pose a risk to individuals’ rights and freedoms, especially around work. This could include algorithms or models used in decision-making processes, such as hiring and promotion.
What binds these diverse, high-risk systems together is they are all commonplace in AI applications.
For instance, facial recognition for identifying employees or personality tests taken as part of a job interview could be considered high-risk systems.
Key Provisions of SB205
Recognizing the urgent need to regulate AI at work, the Colorado Senate has detailed its key provisions in SB205:
Transparency and Disclosure
Employers should tell candidates when they use AI in hiring. This includes sharing which types of AI tools are being used and how these are used in the hiring process.
Bias Mitigation
Employers must periodically assess their AI systems to detect and mitigate bias.
These assessments are also meant to prevent AI algorithms from disadvantaging candidates in any way that directly or indirectly discriminates based on:
- Race
- Gender
- Age
- Other protected characteristics
Accountability
SB205 imposes culpability upon employers for the outcomes of their AI-supported hiring practices. Employers can be held liable and face fines or other penalties if an AI system exhibits a discriminatory effect.
We also talk about liability and employee injuries here.
Candidate Rights
A job seeker can ask for an explanation of any AI decision affecting their job prospects and can contest the decision if they believe it was unfairly made.
Implications for Employers
SB205 will have important consequences for both employers who use AI in the hiring process and for courts analyzing discrimination cases.
On and after February 1, 2026, Colorado employers using AI must navigate a maze of compliance requirements to determine whether they are at risk of violating the law.
Here are some of the most noticeable impacts of this act:
Higher Compliance Costs
SB205 requires employers to invest in new tools, training, and processes.
This includes the costs of:
- Conducting AI audits
- Updating hiring protocols
- Providing candidates with transparency reports
Are you also concerned about what the FTC noncompete ban means for your business? Read this next: Noncompete Agreement Ban by FTC: What You Need to Know.
Legal Risks
Employers who don’t comply with the new AI laws can face lawsuits and fines for discrimination. They need to ensure they have implemented AI systems that are not biased and meet the requirements of SB205.
Impact on AI Adoption
While AI has many benefits in hiring decisions, increased regulation might make employers less inclined to adopt or use AI-assisted systems in the future.
Weigh the costs and benefits of AI in hiring. Ultimately, employers must balance the potential savings and efficiencies of AI-assisted hiring against the regulatory risks of noncompliance.
Employee and Candidate Relations
SB205’s transparency and accountability provisions could promote trust between employers and candidates.
Openly acknowledging the use of AI and informing candidates of their right to challenge decisions can help build a more positive relationship with applicants.
Preparing for SB205
Employers must start thinking about the requirements of Colorado SB205 long before the start date of February 2026.
Among the first steps are:
1. AI Audit
To ensure compliance with SB205, review all the AI-based systems currently being used to make hiring decisions.
For example, consider the potential for bias in existing systems and update them as required.
2. Train HR Teams
Ensure HR and hiring teams are trained on what exactly is required of them under SB205.
This includes how to disclose to candidates that an AI system will evaluate them and how to address any questions or concerns.
3. Seeking Expert Legal Guidance
As SB205 presents various legal complexities, employers should seek legal guidance from Denver business attorneys who specialize in employment law and compliance.
Next Steps: Speak with Denver Lawyers About Colorado SB205 & AI in Hiring
February 1, 2026, will come up quickly. Consult a Denver business lawyer to start preparing now.
From business risk management consulting to ensuring compliance with Colorado laws, the team at The Contiguglia Law Firm can guide you through the legal implications of AI in hiring.
Contact us today.
Did you learn a lot about AI in employment in this article?
Here are three more to read next:
