Recent state AI regulation activity

Several states—including California, Colorado, Illinois and Texas—have recently enacted legislation seeking to place parameters on AI-driven compensation and employment decisions. These include the following:

The Colorado Artificial Intelligence Act ("CAIA")—Effective Feb. 1 (with an enforcement date of June 30, 2026), the CAIA requires employers to exercise "reasonable care" when deploying AI systems in "high-risk" areas—including compensation, promotion, hiring and other employment decisions—to avoid "algorithmic discrimination." To satisfy this duty of care, employers using AI systems to make employment decisions must implement risk-management policies and programs, conduct annual and other periodic impact assessments to identify potential bias, and notify employees if AI is used to make employment decisions.
Illinois' Amendments to the Illinois Human Rights Act ("IHRA")—Effective as of Jan. 1, 2026, the IHRA amendment prohibits employers from using AI tools in connection with employment decisions, including those related to wage setting, unless they (1) notify employees when using AI for these purposes and (2) ensure the tools are not used in a manner that results in discrimination based on protected classes.
The Texas Responsible Artificial Intelligence Governance Act ("TRAIGA")—Effective as of Jan. 1, TRAIGA prohibits employers from using AI tools in employment decisions with the intent to discriminate against protected classes. Unlike other states, this law does not allow for liability based solely on disparate impact or unintentional discrimination.
California Privacy Protection Agency ("CCPA") Regulations—Effective Jan. 1, 2027, the updated CCPA regulations restrict employers' use of automated decision-making technology in employment decisions, including compensation and other terms and conditions of employment. The regulations require employers to conduct risk assessments, provide employees with pre-use notices and allow employees to opt out of automated decision-making processes under certain circumstances.

Co-author Robert Dumbacher of Hunton Andrews Kurth LLP

Various state lawmakers have continued the trend in 2026, introducing bills containing similar restrictions. For example, California Senate Bill 947, also known as the "No Robo Bosses Act," was introduced in February and could significantly restrict how employers use artificial intelligence to make employment decisions. If enacted, the bill would prohibit employers from using automated decision-making systems to process worker data as inputs or outputs to inform employee compensation—unless the employer can clearly demonstrate that any differences in compensation for substantially similar or comparable work assignments are based upon cost differentials in performing the task involved, or that the data was directly related to the tasks that the worker was hired to perform. Notably, this is a revised version of California Senate Bill 7, the original "No Robo Bosses Act," which was vetoed by California Gov. Gavin Newsom on Oct. 13, 2025.

Instant Insights /

State lawmakers seek to regulate employer use of AI for wage decisions

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