With AI increasingly integrated into employee staffing, employee monitoring and workplace decision-making, employers must stay on top of evolving and varying AI compliance requirements and legislation.

With 2025 in full swing, the legal landscape for employer use of artificial intelligence (AI) is poised for further evolution. In 2024 alone, over 400 AI-related bills were introduced across 41 states—a substantial increase from prior years. This unprecedented surge demonstrated growing concerns about privacy, bias and the broader impact of AI on the workplace. While members of Congress have proposed AI legislation covering crucial areas such as national security, intellectual property, online safety and education, it is unclear whether there is political support for comprehensive federal legislation on AI in the employment context.

Accordingly, we expect a continued rise in state-led AI policies. With AI increasingly integrated into employee staffing, employee monitoring and workplace decision-making, employers must stay on top of evolving and varying AI compliance requirements and legislation.

Key State Efforts and Upcoming Trends

In 2024, several states enacted pivotal legislation aimed at regulating AI in the workplace, setting the stage for more robust governance this year.

Colorado

Colorado led the charge in 2024 with a landmark law aimed at curbing discrimination from AI tools, the Colorado Artificial Intelligence Act (“CAIA”). In so doing, Colorado became the first state to enact a comprehensive law relating to the development and deployment of AI hiring tools. CAIA, which goes into effect on Feb. 1, 2026, is designed to protect against algorithmic discrimination and imposes various obligations relating to documentation, disclosures, risk analysis, and mitigation, among others for developers and deployers of “high-risk” Al systems. The law defines high-risk intelligence systems as any AI system that, when deployed, makes – or is a substantial factor in making – a “consequential decision” concerning a consumer. CAIA requires covered employers who use these systems to audit their A.I. systems for bias and maintain transparency regarding their use of automated decision-making.

California

California—a key player in the AI space—passed a whopping 17 A.I. bills last year alone. Among these is the CA AI Transparency Act, which requires "Covered Providers"—A.I. systems with over one million monthly users in California—to clearly indicate when content has been generated or altered by AI. This law also mandates the use of A.I. detection tools, specifies content disclosure standards and sets licensing practices to ensure public access only to compliant AI systems. Another law, the Artificial Intelligence Training Data Transparency Act, compels developers of generative AI systems available to Californians to reveal details about the datasets used in training their systems, promoting transparency and accountability. Both acts take effect in 2026.

Illinois

Illinois passed legislation requiring all Illinois employers to notify employees and applicants when they use AI to make employment decisions. This law, now part of the state's Human Rights Act, provides a broad definition of A.I. and prohibits its use in recruitment, hiring, promotions, and other employment-related areas if it results in discrimination against protected classes. Additionally, the law forbids using ZIP codes as stand-ins for these protected classes. Effective January 1, 2026, this legislation applies to any person or entity employing at least one individual in Illinois.

Maryland

Maryland previously passed legislation regulating the use of facial recognition services to create a facial template during an applicant’s interview without a signed waiver by the applicant. In March 2024, Maryland lawmakers introduced HB 1255, which seeks to limit employers' use of automated employment decision tools for certain employment actions. The bill requires employers to inform job applicants about the use of such tools within a specified timeframe. However, this bill has yet to be passed, highlighting ongoing debate around transparency and fairness in automated hiring practices.

Utah

Utah’s Artificial Intelligence Policy Act (UAIPA) went into effect on May 1, 2024. It imposes certain disclosure requirements on entities using generative A.I. tools with their customers and limits an entity’s ability to “blame” generative AI for statements or acts that constitute consumer protection violations.

Under the UAIPA, a company that has violated a Utah consumer protection law cannot defend itself by arguing that it was the generative A.I. tool that made the violative statement, took the violative act or was used in furtherance of the violation. In effect, companies governed by the UAIPA must treat statements generated by A.I. tools as equivalent to those made by their employees.

Texas

Texas House Bill 1709 (HB 1709), introduced as the Texas Responsible Artificial Intelligence Governance Act, establishes a comprehensive framework for regulating AI systems. With a potential effective date of September 2025, the bill aims to balance innovation with fairness, transparency and accountability, particularly as AI increasingly facilitates consequential decisions like hiring and employment background checks.

Notable Potential Legislation in 2025

Lawmakers in New York and Connecticut are also expected to pursue AI legislation this year. New York lawmakers, on the heels of passing laws on AI-assisted hiring, are exploring expanded measures to hold employers accountable for A.I.-driven employment decisions. Connecticut lawmakers are expected to push for enhanced worker protections against algorithmic discrimination.

What Employers Should Do to be Prepared

As more states introduce AI legislation, this year is crucial for employers navigating the complex landscape of new regulations. To reduce risk and promote compliance, employers should proactively assess their AI practices by conducting audits to evaluate tools for bias, documenting fairness measures and adjusting hiring algorithms as needed. Employers also should review and update their AI policies by consulting legal counsel to ensure alignment with emerging state laws, particularly concerning transparency, data privacy and nondiscrimination. Finally, employers should consider training their human resources and compliance teams on new AI laws as they are passed to stay with compliance of such laws.