Navigating the AI Debate: California and Colorado evaluate AI governance relating to Employment

As artificial intelligence becomes more embedded in workplace decision-making, states like California and Colorado are currently evaluating how this technology should be governed. Both states are at critical junctures—California with Governor Gavin Newsom’s recent response to the California Privacy Protection Agency’s (CPPA) proposed AI rules, and Colorado with a legislative push to revise and delay its landmark AI law. These developments highlight the growing tension between encouraging innovation and enforcing accountability in the use of AI for employment decisions.

Key Objectives: 

1. California Governor Newsom Pushes Back on Proposed AI Rules
2. Colorado Proposes to Delay and Ease Its Landmark AI Law
3. What This Means for Employers and How TCWGlobal Can Help

California Governor Newsom Pushes Back on Proposed AI Rules

In California, the California Privacy Protection Agency (CPPA) has proposed new regulations targeting businesses that use Automated Decision-Making Technologies (ADMTs), especially for profiling or making critical employment-related decisions such as hiring or compensation.

These proposed rules would introduce some of the most detailed and restrictive requirements in the U.S., including:

• Mandating advance notice to job applicants and employees regarding ADMT use,
• Providing opt-out rights,
• Requiring risk assessments, and
• Offering transparency and access rights to affected individuals.

If enacted, these rules could significantly influence how businesses deploy AI in HR processes and may serve as a model for legislation in other states.
However, on April 23, 2025, Governor Gavin Newsom urged regulators to take a more measured approach. In a letter to the CPPA, he cautioned that overly broad or restrictive rules could significantly hinder innovation and economic growth. Newsom emphasized the importance of crafting clear, focused regulations that protect workers without hampering technological progress.

The debate has drawn wide attention. Major companies warn of the chilling effect such rules could have on AI development, while advocacy organizations like the ACLU of Northern California and the California Nurses Association argue that stronger protections are necessary to guard against algorithmic bias and corporate overreach.

The CPPA is now revising its draft regulations, and businesses, especially those operating in California, should continue monitoring developments closely.

Colorado Proposes to Delay and Ease Its Landmark AI Law

Meanwhile, Colorado, which passed its landmark AI law (SB 205) last year, is considering major amendments via Senate Bill 318. Set to take effect in February 2026, SB 205 prohibits AI-driven workplace discrimination and imposes strict compliance obligations on both employers and AI developers.

However, amid concerns about the law’s potential to hinder innovation, lawmakers introduced SB 318, which seeks to:

• Delay enforcement until January 1, 2027,
• Narrow the scope of employer notification and risk assessment requirements,
• Make it more difficult for individuals to challenge AI-driven decisions unless AI is the “principal basis” for the outcome, and
• Expand exemptions for startups and small developers, particularly those committed to transparency.

With only days left in the legislative session, Colorado lawmakers must decide by May 7, 2025, whether to pass this softening measure. Regardless of the outcome, companies will need to continue to monitor their AI practices now in preparation for eventual enforcement.

What This Means for Employers and How TCWGlobal Can Help

The evolving legal landscape makes one thing clear: AI regulations relating to its usage in employment-related decision making is here to stay. While the scope and implementation of these laws remain in flux, the momentum toward greater oversight of AI in employment decisions is undeniable.

Businesses must not only keep up with changing regulations, but they must also be proactive in adopting best practices for transparency, accountability, and ethical AI use. This is especially true for companies with operations across multiple jurisdictions, where inconsistent or conflicting laws can create serious compliance challenges.

As a trusted global Employer of Record (“EOR”), TCWGlobal is uniquely positioned to support your organization’s contingent workforce needs. As a trusted global EOR and staffing partner, we pride ourselves on navigating complex, fast-changing legal frameworks—both in the U.S. and internationally— to remain compliant in our practices, while staying at the forefront of technology advancements through our proprietary onboarding and VMS platform, StaffingNation.

To learn more about this rapidly evolving area of AI regulations addressing employment decision-making tools, take a look at our comprehensive AI Legislation Chart outlining key AI laws across jurisdictions worldwide.