It is no secret that the use of artificial intelligence, or “AI,” is increasing every day in every sector of life. Thus, it should come as no surprise that employers are turning to AI to assist with a wide range of employment practices, including hiring and recruitment, measuring employee performance metrics and enhancing workplace efficiencies. However, employers utilizing AI in their employment practices must ensure that they are doing so without violating any state laws.
A Patchwork Approach to AI Regulation in Employment
We see the beginnings of a patchwork-style approach to regulating the use of AI in employment law practices, with several states introducing or enacting laws that impose restrictions and requirements on AI-driven employment practices.
New York’s governor Kathy Hochul recently announced a proposal that the state’s Worker Adjustment and Retraining Notification (WARN) Act be expanded to require businesses with 50+ employees to report AI-driven layoffs, which would make New York the first state to impose transparency on employers who utilize AI to replace jobs typically performed by humans.
Illinois recently amended its Human Rights Act in two notable ways with respect to the use of AI. First, an employer commits a civil rights violation under the Act if it uses AI that has the effect of subjecting employees to unlawful discrimination or uses zip codes as a proxy for protected classes. Second, an employer commits a civil rights violation if it fails to notify employees of the use of AI in making employment decisions. The new law is relatively broad and applies to all employers employing one or more employees in the state. This law is currently scheduled to take effect January 1, 2026.
Colorado’s law is aimed at preventing “algorithmic discrimination” when “high-risk” AI systems are used to make, or are a “substantial factor” in making, “consequential decisions” when utilized. Thus, an employer’s use of AI tools that play a “substantial factor” in employment decisions in hiring, retention, or promotion may likely be considered “high-risk” AI systems subject to the law. The law is currently scheduled to take effect February 1, 2026.
California’s Attorney General has issued legal advisories reinforcing that AI is already subject to existing laws and that an employer’s use of AI to drive employment decisions are not exempt from anti-discrimination and privacy laws.
Minnesota’s Emerging AI Regulations
Although no such law has been enacted in Minnesota yet, it may be coming. On February 11, 2025, the Minnesota Senate’s Committee on Labor convened to discuss the need for regulatory measures to protect workers from potential risks of AI in the workplace. This means that Minnesota has now joined over thirty states that have formed some version of an AI taskforce to issue recommendations that will inevitably inform additional legislation.
Employer Considerations Amidst Changing AI Regulations
Due to this rapidly changing legal landscape, employers already utilizing AI in employment practices should review the use of such technologies to ensure they are not creating additional risks. In addition, employers should also evaluate their contracts with AI developers to ensure the product they receive will not violate state anti-discrimination laws, as the new AI laws generally do not enable employers to escape liability merely because they did not develop the AI product being utilized in the workplace.
Need Assistance?
If you have any questions or would like help finding additional resources, please reach out to me at npuechner@larkinhoffman.com.