AI has found a home in the hiring process. Employers use it to sort résumés, rank candidates, schedule interviews, and flag potential risk, all in the name of speed, consistency, and efficiency. But those same tools now trigger growing legal scrutiny. A new wave of state laws is reframing how employers must approach “consequential decisions,” a term gaining legal weight in 2025.
The message is clear: when algorithms affect jobs, paychecks, or promotions, employers must do more than just plug and play.
Colorado’s AI Act has emerged as the first enacted law to define what constitutes a “consequential decision,” setting a foundation that other states may build on or challenge. Under the law, a consequential decision is one that materially affects a person’s access to, or the terms of, employment, housing, education, financial services, essential goods or services, or legal rights. These are the decisions that shape livelihoods, opportunities, and futures.
If your company uses an AI system to reject an applicant, automate interview scoring, or issue a final adverse action notice based on a background check, you’re making a consequential decision. And under emerging laws, that decision carries compliance obligations.
Colorado’s law goes further than just defining the term. It is the nation’s first comprehensive AI governance framework focused squarely on consequential...
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