New AI Hiring Laws: How to Stay Compliant
As soon as the news came out that Workday was being sued over AI hiring discrimination, I knew I'd be answering a lot of questions. Everyone wants to know whether these tools are actually biased — and, honestly, whether there are other AI tools quietly waiting to hurt their business.
Here's my short answer: if you have ever used a job board that ranks applicants, software that filters resumes, or a tool that scores candidates, you are already using artificial intelligence to hire, whether you meant to or not.
That matters now. Connecticut and Colorado have passed laws regulating how employers use AI in hiring and employment decisions, and they are not alone — as of early 2026, 19 states have AI rules tied to employment, according to SHRM.
The unsettling part? In those states, 57% of HR professionals admit they don't know the laws exist.
And these rules can reach you even if you're nowhere near either state.
Why a Law in Another State Affects You
Both laws reach past their own borders.
Colorado's law (SB 26-189, effective January 1, 2027) reaches businesses operating in the state and the Colorado residents who apply for or hold jobs with them. Connecticut's (Senate Bill 5, phasing in October 2026 and October 2027) reaches employers doing business there. Neither is limited to companies headquartered in-state, so the practical question for you is not where your office is — it is whether you are hiring people who live in those states.
Post a job online, and a single applicant from Hartford or Denver can pull you into the rules. As the employment attorneys at Proskauer noted, web-based applications mean no employer can safely assume the law won't apply to them.
What the Laws Actually Require
Both target AI that meaningfully shapes an employment decision — hiring, promotions, pay, or performance. Tools that only spell-check or store data don't count.
The core obligations:
Tell people when AI is involved. If a tool helps decide who gets hired or promoted, you owe them clear, plain-language notice.
Explain rejections. Under Colorado's law, if AI helps turn someone down, you have 30 days to explain the decision and the role AI played in it.
Keep records and allow a human second look. Colorado requires holding records at least three years, letting candidates correct bad data, and letting them ask a real person to review.
Don't blame the algorithm. Connecticut is blunt about this: using AI is no defense against a discrimination claim. But documented bias testing can count in your favor.
The Real Risk for Small Businesses
The quiet danger is that most small businesses have no idea which of their tools use AI.
A recruiter leans on a platform that auto-ranks applicants. An HR manager runs resumes through software that scores them. If that tool screens out qualified people in a biased way, the liability lands on you, not the vendor.
And Colorado and Connecticut are where this starts, not where it stops. They're part of a fast-moving wave, with more states writing these rules every legislative session. If you have employees or applicants in other states today, similar laws are probably headed your way tomorrow. Getting your house in order now beats scrambling when the rules land where your people actually are.
Your Action Plan
You don't need a law degree to get ahead of this.
Inventory your tools. List every system you use to recruit, screen, or evaluate people. Ask each vendor one question: does this use AI to rank or score candidates?
Judge tools by what they do, not what they're called. A product doesn't have to be marketed as AI to be covered.
Add a notice step. Build plain-language disclosure into your application and hiring process before the deadlines hit.
Ask your recruiter or hiring manager about their AI tools. This is the most important one in my opinion. If you're a client of ours, you can know that we are not using AI in our candidate ranking process, and we continually ask our partners whether they are doing the same.
The Bottom Line
AI can be a real help in hiring. These laws make it your responsibility.
The good news: a little preparation now keeps you compliant and protects you from costly claims later.
Want us to walk your hiring stack with you? Grab a free 30-minute session with one of our HR experts.