The biggest development in Colorado employment law this month is the enactment of Senate Bill 26-189 by the Colorado legislature, which repeals and replaces Colorado’s widely discussed Artificial Intelligence Act (“CAIA”) before it ever took effect. The original law, enacted in May 2024 and scheduled to go into effect in January 2027, focused on employers’ use of “high-risk” AI systems in “consequential” employment decisions. The law required employers relying on such systems to comply with risk management strategies for ensuring the systems do not result in “algorithmic discrimination, requiring a comprehensive understanding of the inner workings of such systems.
In April 2026, Elon Musk’s artificial intelligence company, xAI, filed a lawsuit in federal district court against the State of Colorado alleging the CAIA violated the First Amendment to the U.S. Constitution by restricting how developers design AI systems. xAI claimed the CAIA would force it to modify Grok, its flagship AI model, to adhere to Colorado’s vision on issues of diversity and discrimination.
Weeks later, the U.S. Department of Justice intervened in xAI’s lawsuit, claiming the CAIA violates equal protection under the Fourteenth Amendment by requiring employers to prevent unintended discriminatory effects while allowing other discrimination to occur in the name of promoting diversity.
On April 27, 2026, a U.S. Magistrate judge stayed the enforcement of the CAIA following the Colorado attorney General stipulating to a temporary stay of enforcement in light of the impending passage of a new AI law.
The new law, SB26-189, passed the Colorado State Senate and House on May 7 and May 9, 2026 and was signed by Governor Polis on May 14, 2026. The new legislation takes a substantially different approach, focusing on automated decision-making technology (ADMT), defined as technology that processes personal data and uses computation to generate output, including predictions, recommendations, classifications, rankings, scores, or other information used to make, guide, or assist in a decision concerning an individual. The law does not cover all ADT, but rather those that “materially influence” consequential decisions. The law requires employees be provided with notice of the use of ADMT, opportunities to correct inaccurate information, and meaningful human review of automated decisions rather than the “high risk” systems and algorithm management of the original law.
The bill goes into effect on January 1, 2027.
For workplace investigators, the practical takeaway is clear: allegations involving hiring, promotion, discipline, performance evaluations, or terminations increasingly require investigators to understand whether technology played a role in the challenged decision. For employers to properly understand their risk, investigations may need to include questions regarding algorithmic recommendations, automated screening tools, and the extent of human involvement in the final employment decision. As AI becomes more integrated into workplace management, investigators should expect these issues to become routine components of discrimination and retaliation investigations.
Sources:
C.R.S. § 6-1-1701
https://www.mayerbrown.com/en/insights/publications/2026/05/colorado-enacts-new-admt-law-replacing-colorado-ai-act