As employers continue finding new ways to use artificial intelligence (“AI”) tools and software to support business operations, state legislators have taken notice. Specifically, state lawmakers are increasingly scrutinizing employers’ use of AI and automated decision tools to set or influence employee compensation, with the stated aim of curbing potentially discriminatory impacts resulting from the use of algorithmic wage setting and to increase transparency to employees and applicants regarding the use of such technology.
Recent State Legislative Activity
Several states—including California, Colorado, Georgia, and Illinois—introduced bills in 2025 seeking to place parameters on AI-driven compensation decisions. New York and Maryland lawmakers continued the trend in January 2026, introducing bills containing similar restrictions.
While these proposed state laws are not all identical, they share common features. First, they similarly define “automated decision systems” to include systems, software, or processes—including those which rely on machine learning or AI techniques—that are used to assist or replace human decision making. In the employment context, these definitions encompass automated human resources tools and software systems that use predefined rules to process data through algorithms and assist with the performance of human resources functions. These tools could include everything from basic rule-based systems to sophisticated technologies powered by...
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