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Colorado Leads the Way: The CAIA and Its Implications for AI Regulation

CAIA

On May 17, 2024, Colorado passed the Colorado Artificial Intelligence Act (CAIA), becoming the first US state to pass a law applying to artificial intelligence (AI). The new law aims to protect consumers by regulating the private-sector use of AI systems. The law also applies to Colorado-based businesses utilizing AI systems in employment decision-making processes, either directly or as a significant determinant.

Effective February 1, 2026, the CAIA will place an obligation of reasonable diligence on creators and implementers of high-risk AI systems to shield consumers from identifiable or foreseeable perils of algorithmic bias. While the legislation is not exclusively aimed at employers, high-risk AI systems encompass those involved in employment-related decision-making processes. The statute includes a limited exemption for companies with fewer than fifty employees who do not employ their proprietary data to train AI systems.

The law assumes a deployer is acting responsibly if they take specific steps to comply, which include:

  • Establishing risk management procedures: Deployers are required to implement a policy and program aimed at managing risks, meeting specific standards. This policy and program should undergo regular evaluations and revisions, ensuring they are both reasonable and aligned with various specified factors.
  • Assessing Impact: Deployers must conduct yearly evaluations of high-risk AI systems. These assessments should include the system’s purpose, potential risks of discrimination, data processed, performance metrics, transparency measures, and post-deployment safeguards.
  • Notification Requirements: Under the CAIA, deployers must inform Colorado residents of AI system usage for employment decisions. Employers must disclose system purpose, potential decisions, and provide clear descriptions to applicants. If an applicant is adversely affected, employers must explain the decision, allow data correction, and offer an appeal. Covered employers must prominently display AI system information on their website and report discrimination discoveries to the Colorado Attorney General within 90 days.

The legislation offers a limited exception for companies employing fewer than fifty individuals, provided they do not utilize internal data for training the AI system. Employers in Colorado should remain vigilant for updates or revisions to the CAIA, while also ensuring they are ready to comply with any changes.

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