Colorado Expands Employer Compliance Obligations Across AI, Workforce Reporting, I-9 Practices, Pay Discussions, and Leave

Colorado employers are facing another wave of employment law developments affecting hiring, workforce reporting, employment eligibility verification, employee pay discussions, and paid family and medical leave. Some of the changes are in effect, while others will take effect in 2027. Employers with Colorado employees should begin reviewing their policies and practices now to ensure they are prepared.

Colorado Moves Toward January 2027 AI Requirements

Colorado continues to develop its regulatory framework governing the use of automated tools in employment decisions. In May 2026, Governor Jared Polis signed Senate Bill 26-189, which revised Colorado’s Automated Decision-Making Technology Act. Beginning January 1, 2027, the law will regulate automated decision-making technology (“ADMT”) used to materially influence “consequential decisions,” including decisions concerning an individual’s access to, eligibility for, or compensation related to employment. 

Among other requirements, businesses that deploy covered ADMT must provide certain notices to individuals, maintain records demonstrating compliance for at least three years, provide additional information following an adverse outcome involving ADMT, and provide mechanisms for individuals to request correction of inaccurate personal data and meaningful human review of certain adverse decisions. 

On August 11, 2026, the Colorado Attorney General’s Office filed proposed rules intended to clarify and implement the new law. The proposed rules provide additional detail concerning developer and deployer responsibilities, adverse-outcome disclosures, consumer requests, and human review. Employers using automated tools to screen applicants, rank candidates, evaluate employees, recommend compensation, or otherwise assist with employment decisions should determine whether those tools may fall within the law before January 1. 

The Attorney General is accepting formal comments through October 26, 2026, when a public rulemaking hearing is scheduled. The Attorney General requested comments by September 4, 2026, for consideration in a revised proposed draft expected later in September. 

Colorado Will Require Large Employers to Continue EEO-1-Style Reporting

As we recently discussed in our client alert, “EEOC Signals a Potential End to Annual Race and Sex Reporting Requirements,” the EEOC has proposed eliminating the federal requirement that covered employers submit annual EEO-1 reports containing aggregate workforce demographic information. At the time, we cautioned that changes at the federal level would not eliminate independent state reporting requirements. Colorado has now provided another example of that trend. 

Under House Bill 26-1207, the Disclosure of Demographic Workforce Data Act, private-sector entities conducting business in Colorado with 100 or more workers will be required, beginning July 1, 2027, to include EEO-1 demographic workforce data in their periodic reports filed with the Colorado Secretary of State. The required information includes workforce data categorized by race, ethnicity, gender, and job category. 

Notably, Colorado’s reporting obligation will continue even if the federal government repeals or discontinues the EEO-1 reporting requirement. Thus, covered Colorado employers should not discontinue their collection of EEO-1 demographic information solely because the federal reporting requirement changes. Instead, employers should begin assessing how they will maintain the necessary workforce data for Colorado reporting purposes. 

New Identification Document Requirements Affect the I-9 Process

House Bill 26-1283, which took effect June 3, 2026, creates new obligations for Colorado employers handling government-issued identification documents during onboarding and employment eligibility verification.

The law generally prohibits an employer or its agent from demanding, confiscating, retaining, or otherwise requiring an employee, applicant, or other individual performing or seeking work to surrender a government-issued identification document. Employers may temporarily retain original documents when necessary to verify employment eligibility and make permitted copies, but generally may not retain the originals for more than 10 hours. 

The law also adds a separate compliance step to the employment eligibility verification process. Employers must provide individuals with written notice of the law’s protections in English and, if the employer knows the individual’s primary language is not English, in that language as well. The individual must acknowledge the notice, and the employer must retain a record of both the notice and acknowledgment in its employment records. 

Employers should therefore review their Form I-9 and onboarding processes, including procedures used by third-party onboarding providers, staffing agencies, and other agents, to ensure original identification documents are promptly returned, and the new notice, acknowledgment, and recordkeeping requirements are incorporated into the process.

Colorado Court Expands Protection for Employee Pay Discussions

Colorado employers should also take note of the Colorado Court of Appeals’ July 23, 2026 decision in Verheggen v. Adams County Department of Human Services. In an issue of first impression, the court held that an employee does not need to allege gender discrimination to pursue a retaliation claim under the wage-discussion provisions of either Colorado’s Equal Pay for Equal Work Act or the Colorado Anti-Discrimination Act. 

Both statutes prohibit employers from retaliating against employees because they inquire about, disclose, compare, or otherwise discuss their wages. The Court of Appeals concluded that those protections stand independently from the statutes’ protections against sex-based compensation discrimination. In other words, an employee’s wage discussion does not need to concern a gender-based pay disparity to constitute protected activity. 

The decision reinforces the need for employers to exercise caution when responding to employee questions or complaints regarding compensation. Managers and human resources personnel should understand that employees may engage in protected activity simply by raising or discussing their own wages, even where the employee makes no allegation that compensation differences are based on sex or another protected characteristic.

Colorado Narrows When FAMLI Benefits Are Available

Colorado has also amended its regulations governing the state’s Family and Medical Leave Insurance (“FAMLI”) program. Effective July 1, 2026, amended 7 CCR 1107-3.4 clarifies that FAMLI benefits are available only for absences caused by a qualifying condition under Colorado’s FAMLI statute. The updated rule applies a “but-for” standard: an absence is caused by a qualifying condition when the absence would not have occurred but for that condition. 

The clarification narrows the circumstances in which an employee may receive FAMLI benefits by requiring a direct causal relationship between the qualifying reason and the absence from work. Employers administering FAMLI leave, including those using private plans or third-party administrators, should ensure their leave-management practices account for the updated standard while continuing to comply with FAMLI’s job-protection and anti-retaliation requirements.

What Employers Should Do Now

Colorado employers should consider taking the following steps now to prepare for these developments:

• Inventory AI and automated decision-making tools. Identify any AI or automated tools used in recruiting, hiring, promotion, compensation, performance management, or other employment decisions, and assess whether those tools may be subject to Colorado’s ADMT requirements beginning January 1, 2027.
• Prepare for Colorado workforce demographic reporting. Determine whether the organization will be covered by HB 26-1207 and, if so, ensure that EEO-1 demographic data continues to be collected and maintained even if the federal EEO-1 reporting requirement is eliminated or modified.
• Update onboarding and I-9 procedures. Review practices for handling government-issued identification documents and revise onboarding materials to incorporate HB 26-1283’s notice, acknowledgment, document-retention, and recordkeeping requirements.
• Train managers on employee pay-discussion protections. Remind managers and human resources personnel that employees may be protected when they inquire about, disclose, compare, or discuss wages, even when the discussion does not involve an allegation of sex-based or other unlawful discrimination.
• Review FAMLI administration. Update leave procedures and coordinate with third-party administrators, where applicable, to ensure FAMLI benefits are limited to absences caused by a qualifying condition under the amended causation standard.

Key Takeaway

Colorado continues to expand the employment compliance obligations applicable to employers operating in the state, with recent developments affecting the use of artificial intelligence, workforce demographic reporting, onboarding practices, employee pay discussions, and family and medical leave. With several new requirements taking effect in 2027 and others already in force, employers should use the coming months to assess potentially covered technologies and practices, update required notices and recordkeeping procedures, preserve necessary workforce data, and ensure managers and human resources personnel understand the scope of employees’ rights under Colorado law. Employers should also continue to monitor pending rulemaking and other guidance, particularly regarding Colorado’s ADMT law, as additional compliance requirements may be clarified before the law takes effect on January 1, 2027. For more information or assistance, please contact one of Honigman's Employment and Labor Attorneys here.