Navigating the AI Employment Landscape in 2026: Considerations and Best Practices for Employers
As the landscape of artificial intelligence (AI) continues to evolve, 2026 is poised to bring significant changes in AI regulation and litigation. With new laws and enforcement priorities emerging at both federal and state levels, employers will need to navigate a complex web of compliance requirements.
Key Considerations for Employers
Employers are now facing a rapidly changing patchwork of state-level AI laws that impose distinct requirements for transparency, risk assessment, and anti-discrimination in the use of AI systems, particularly in employment contexts. High-profile litigation regarding AI training data, copyright, and algorithmic bias is also on the rise, raising novel legal questions for employers.
US AI Laws and Regulations
Colorado’s SB 24-205
Starting on June 30, 2026, Colorado’s SB 24-205, also known as the Colorado AI Act, will introduce new compliance obligations for entities using high-risk AI tools for employment decisions affecting Colorado residents.
- Risk Assessments: Employers must evaluate high-risk AI systems to identify and mitigate potential harm.
- Transparency Notices: Candidates and employees must be informed when AI influences employment decisions.
- Reasonable Care Standard: Employers must take proactive steps to prevent algorithmic discrimination.
California’s SB 53
Effective January 1, 2026, California’s Transparency in Frontier Artificial Intelligence Act (SB 53) focuses on transparency and safety governance for “frontier” AI models, imposing heightened obligations on developers with substantial revenues.
- Developers must publicly publish an annual Frontier AI Framework detailing risk mitigation strategies.
- Mandatory reporting of critical safety incidents to the California Office of Emergency Services is required.
Illinois House Bill 3773
Effective January 1, 2026, Illinois HB 3773 prohibits employers from using AI that discriminates based on protected classes. Employers must notify employees when using AI in recruitment or employment decisions.
Texas’ HB 149
Effective January 1, 2026, Texas’ Responsible Artificial Intelligence Governance Act focuses primarily on government agencies and limits obligations for private employers.
Federal Developments
Executive Order 14365
On December 11, 2025, Executive Order 14365 aimed to establish a national framework for AI, seeking to preempt state laws that create compliance burdens.
Compliance Considerations for Employers
To prepare for compliance with these new regulations, employers should:
- Develop clear compliance roadmaps.
- Implement risk assessment frameworks to mitigate AI bias.
- Draft transparency notices and refine internal protocols.
- Ensure third-party AI providers comply with legal obligations.
Ongoing Litigation
One significant case to watch is Mobley v. Workday, Inc., where a job applicant alleges that Workday’s AI recruitment tools disproportionately rejected certain demographics. This case represents a critical test of algorithmic bias in employment decisions.
As AI technology advances, employers must remain vigilant in adhering to evolving legal standards while proactively managing AI-related risks. The landscape in 2026 will require a robust understanding of both state and federal regulations to ensure compliance and mitigate potential liabilities.
