Colorado’s New AI Law: What Employers Should be Doing Now

By Sean Stewart
Shareholder, Lyons Gaddis

On February 1, 2026, Colorado will put into effect the Colorado Artificial Intelligence Act (CAIA). the first law of its kind in the nation to regulate “high-risk” AI systems. These include technologies used to make or assist in major decisions affecting people’s lives, such as hiring, promotions, housing, credit, and insurance.

For Colorado employers, this means that any AI system used in employment or business decisions will soon come under new legal scrutiny. The time to prepare is now.

Drawing on deep experience at the intersection of business, technology, and regulation, Lyons Gaddis helps employers turn evolving laws like the Colorado AI Act into opportunities for stronger governance and trust.

Understanding “High-Risk” AI

Under the CAIA, a “high-risk” AI system is one that has the potential to significantly affect an individual’s access to essential services or opportunities, like a job or a loan. For employers, this can include applicant tracking systems, resume-screening software, or even scheduling tools that use predictive analytics.

If AI plays a role in who gets hired, promoted, or disciplined, your organization will likely be impacted.

Key Steps to Take Before 2026

1. Audit your systems. Identify where AI exists across your operations, whether developed internally or provided by vendors.
2. Review vendor relationships. Even when AI comes from third-party software, employers remain responsible for compliance. Make sure your contracts require vendors to follow CAIA standards and share documentation.
3. Conduct risk and impact assessments. Evaluate each AI system’s purpose, data sources, and decision-making process. Identify any potential bias or fairness concerns and outline steps to address them.
4. Notify and train. The law will require employers to disclose when AI is used in significant decisions. Make sure HR, compliance, and management teams understand what’s changing and how to communicate it.
5. View compliance as opportunity. Taking a proactive approach not only reduces legal exposure but also reinforces trust with employees and customers who expect fairness and transparency.

The Bottom Line

The CAIA doesn’t ban AI, it demands responsibility. Employers that begin preparing now will not only meet the law’s requirements but also gain a competitive advantage by demonstrating accountability and ethical innovation.

This article is for general informational purposes only and does not constitute legal advice. For guidance specific to your organization, please consult legal counsel.