Colorado Replaces AI Act With Narrower ADMT Law

In May 2026, Colorado enacted Senate Bill 26‑189, which repealed and replaced its 2024 AI Act with a new framework focused on Automated Decision‑Making Technology (ADMT).

The new law regulates ADMT only when it materially influences a consequential decision, including employment decisions.

This update applies to covered entities using ADMT, and the law takes effect on January 1, 2027, covering decisions made on or after that date.

What Employers Need to Do

• Identify AI/ADMT tools used in employment decisions, especially hiring, promotion, compensation, or termination processes.

• Determine whether those tools materially influence outcomes, not just whether AI is present.

• Implement notice procedures informing individuals when covered ADMT is used.

• Establish a post‑adverse‑outcome process, including explanations and meaningful human review.

• Update recordkeeping practices to retain required documentation for at least three years.

Overview

• Colorado replaced its original 2024 AI law with a new, narrower framework centered on Automated Decision‑Making Technology (ADMT).

• The law applies only when ADMT materially influences a consequential decision, a key threshold that narrows coverage.

• Consequential decisions still include high‑impact areas such as employment, housing, lending, education, and health care.

• The law removes the prior “high‑risk AI system” model, along with broad governance concepts tied to algorithmic discrimination.
  • “Governance” refers to the policies, controls, and oversight practices a business uses to manage how a technology is designed and used, including how it addresses risks and ensures responsible outcomes.

• It also eliminates several major requirements from the earlier law, including:
  • duty of care obligations
  • risk management programs
  • algorithmic impact assessments

• Instead, the new framework is more targeted and disclosure‑focused, emphasizing:
  • notice
  • post‑decision transparency
  • human review rights
  • record retention

• The law includes significant carve‑outs, excluding many routine tools and processes such as:
  • spreadsheets and basic analytics tools
  • cybersecurity and fraud‑prevention systems
  • administrative HR processes and workflow tools
  • systems that only summarize or organize information for human review

Why This Matters

The new law matters because Colorado moved away from one of the most aggressive AI regulatory models in the U.S. and replaced it with a narrower, more business‑friendly framework that focuses on targeted obligations rather than broad compliance programs.

For employers, the key takeaway is that AI regulation has shifted from “What tools are you using?” to “Do those tools meaningfully shape employment decisions?” Even with a human in the loop, tools that rank candidates, score employees, or influence pay or eligibility decisions may still fall within scope.

Key Risks for Employers

• Assuming AI tools are no longer regulated because the law is narrower, without analyzing whether they materially influence employment decisions
• Overlooking hiring, screening, or compensation technologies that affect outcomes even indirectly
• Failing to implement proper notice and post‑decision explanation processes
• Not establishing a meaningful human review mechanism when adverse decisions occur
• Neglecting required record retention, which creates exposure during enforcement or audits

Additional Information

The revised law is enforced exclusively by the Colorado Attorney General, and it does not create a private right of action.

Compared to the prior framework, this law centers on a notice, transparency, and process‑based model, meaning employers should revisit prior compliance efforts and adjust them rather than discard them.

Source References

• Colorado SB 26-198 – Automated Decision-Making Technology
• Colorado Delays the Colorado Artificial Intelligence Act for June 2026 (VensureHR)

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