Most small teams know they should have an acceptable use policy for AI tools. Fewer know that in several states, that policy now has a legal floor, and that floor includes telling employees specifically when AI is monitoring their work or influencing decisions about their employment.
TL;DR: Illinois, Connecticut, Colorado, New York, and Delaware all require employers to disclose AI-based monitoring or evaluation to affected employees. Illinois and New York requirements are in effect now. Connecticut's SB 5 phases in starting October 2026. Colorado's SB 26-189 takes effect January 2027. If you have employees in any of these states and use AI hiring tools, productivity monitoring software, or AI meeting transcription that feeds into performance data, review your disclosure practices against this tracker.
State-by-state tracker
| State | Law | What must be disclosed | Effective | Enforcement | Penalty |
|---|---|---|---|---|---|
| Illinois | HB 3773 (amends Illinois Human Rights Act) | AI use in hiring, promotion, discipline, discharge, training, tenure, terms of employment | Jan 1, 2026 | IL Dept. of Human Rights, AG | Actual damages + civil penalties + attorneys' fees |
| New York | New York Labor Law § 740A | Electronic monitoring of telephone, email, internet use, written notice + signed acknowledgment + visible workplace posting | Existing (2022) | NY AG | $500 first violation, $1,000 second, $3,000 subsequent |
| Delaware | Delaware Code Title 19 § 705 | Electronic monitoring of telephone, email, internet, one-time or daily electronic notice + written acknowledgment | Existing | Civil courts | $100 per violation |
| Connecticut | SB 5 (AI Responsibility and Transparency Act) | (Oct 1, 2026) AI-related WARN Act layoff disclosures to CT Dept. of Labor; (Oct 1, 2027) written notice to employees/applicants when AI materially influences employment decisions | Oct 1, 2026 (phase 1); Oct 1, 2027 (phase 2) | CT AG under CUTPA; no private right of action | Unfair trade practice penalties |
| Colorado | SB 26-189 (replaces CO AI Act SB 24-205) | Notice when ADMT used in consequential employment decisions; plain-language description within 30 days of adverse decision; human review option | Jan 1, 2027 | CO AG | TBD (rulemaking in progress) |
What each law actually requires
Illinois, HB 3773 (in effect now)
Illinois amended its Human Rights Act effective January 1, 2026 to add AI-specific requirements that cover any employer with at least one Illinois employee.
The law prohibits using AI tools in employment decisions where the AI produces discriminatory outcomes based on protected characteristics. Beyond the anti-discrimination requirement, employers must provide notice to employees and applicants when AI is used in any decision involving recruitment, hiring, promotion, renewal, training or apprenticeship selection, discharge, discipline, tenure, or the terms and conditions of employment.
Notice requirements are still being finalized through rulemaking, draft regulations were published in May 2026 with a comment period closing June 29, 2026. In the interim, the safest approach is written notice at the time of application or at onboarding that identifies the AI tool being used, the category of decision it informs, and how employees can raise concerns.
Employers must retain notice documentation for four years.
New York, Labor Law § 740A (in effect now)
New York's electronic monitoring disclosure law predates the AI wave but applies to many AI monitoring tools. Before beginning electronic monitoring, including monitoring of email, internet activity, or computer use, New York employers must provide written notice, obtain a signed acknowledgment from each employee, and post a visible notice in the workplace.
This covers AI productivity tracking software, AI tools that monitor screen activity or application usage, and any system that analyzes employee computer behavior. Meeting transcription tools that generate and retain transcripts accessible to managers also fall within the scope of most reasonable interpretations.
The notice must specify that electronic monitoring may occur and identify the forms of monitoring used. A blanket "the company may monitor device usage" statement does not satisfy the specificity requirement for screenshot or keystroke monitoring.
Delaware, Title 19 § 705 (in effect)
Delaware's monitoring statute is narrower, it covers telephone transmissions, email, and internet access, but it predates and applies to most basic monitoring tools. Employers must either provide a one-time written notice of monitoring policies or a daily electronic notice each time the employee accesses company systems. Written acknowledgment from the employee is required.
The penalty per violation is $100, which can accumulate across a workforce that was never notified.
Connecticut, SB 5 (phased: Oct 2026 / Oct 2027)
Connecticut Governor Ned Lamont signed SB 5 on May 27, 2026. The law rolls out in two phases:
Phase 1, October 1, 2026: Employers filing notices under the federal WARN Act for mass layoffs must disclose to the Connecticut Department of Labor whether the layoffs are "related to" the employer's use of AI or other technology changes.
Phase 2, October 1, 2027: Employers using automated employment-related decision technology must provide written notice to employees and applicants disclosing that AI is being used, the purpose of the system, the nature of the decision, the trade name of the tool, the categories and sources of personal data analyzed, how data is assessed, and employer contact information for questions.
Connecticut's enforcement sits with the Attorney General under CUTPA, there is no private right of action. The AG can impose civil penalties for violations.
Colorado, SB 26-189 (Jan 1, 2027)
Colorado has had a turbulent path to AI legislation. The original Colorado AI Act (SB 24-205) was substantially rewritten before taking effect. In May 2026, Governor Jared Polis signed SB 26-189, which replaces the prior law with a streamlined framework targeting "automated decision-making technology" (ADMT) used in consequential employment decisions.
Starting January 1, 2027, employers deploying ADMT to materially influence employment decisions must:
- Provide "clear and conspicuous notice" that ADMT will be or is being used in a consequential decision
- Following an adverse decision involving ADMT, provide within 30 days a plain-language description of the decision and the role the ADMT played
- Give employees the ability to request correction of factually incorrect data and seek meaningful human review of the decision, to the extent commercially reasonable
- Retain records for at least three years
Colorado's AG will enforce the law. Rulemaking is ongoing as of mid-2026.
Which AI tools trigger these obligations
Most small teams use at least one tool that falls under these frameworks. The question is whether you recognize which ones.
Likely covered:
- AI resume screening or applicant tracking tools that score or rank candidates (Illinois, Connecticut, Colorado when effective)
- Productivity monitoring software that tracks application usage, active time, or generates performance scores (New York, Delaware, Illinois if output influences employment decisions)
- AI meeting transcription tools where transcripts are retained and accessible to managers for performance purposes (New York, Delaware, and potentially Illinois depending on use)
- Performance management platforms that use AI to generate ratings, flag low performers, or recommend development actions (Illinois, Connecticut, Colorado when effective)
- AI scheduling tools that flag availability or compliance patterns to managers (Illinois, depending on whether output influences terms of employment)
Likely not covered:
- Internal AI tools used exclusively for customer-facing work with no employee performance data component
- AI tools used solely for business analytics that do not feed into individual employment decisions
- Basic spell-check or autocomplete tools with no behavioral monitoring component
If you are uncertain, the Illinois framework provides useful guidance: if an AI tool's output influences any decision about a specific employee's employment relationship, hiring, discipline, scheduling, termination, disclosure obligations apply.
Copy-paste notice language
This sample covers the core disclosure requirements across Illinois, New York, and Delaware. Customize it to reflect your actual tools and add Connecticut/Colorado language before their effective dates.
Notice: Use of Automated Tools and Electronic Monitoring
[Company Name] uses technology that may monitor or assist in decisions related to your employment. This notice describes those tools and your rights.
Electronic monitoring: We may monitor electronic communications sent or received using company systems, including email, internet access, and computer activity. Monitoring may include [specify: email content review / internet usage logs / application monitoring / screenshot capture / keystroke logging, list only what applies]. This monitoring may occur at any time without additional notice.
AI-assisted employment decisions: We use automated tools that may assist in decisions related to [specify applicable categories: hiring / performance reviews / scheduling / promotion / discipline]. These tools include [list specific tool names where known]. AI-assisted tools do not make final decisions, a human manager reviews AI outputs before any employment decision is made. You may request information about which tools were used in a specific decision affecting your employment by contacting [HR contact / email].
Questions: Contact [HR contact] with questions about this notice.
Acknowledged by: _________________ Date: _________________
Compliance checklist
Before your next hiring cycle or employee handbook update:
- Inventory every AI tool that touches employment decisions or monitors employee activity
- Identify which states your employees are located in (not where the company is headquartered)
- For Illinois employees: confirm written notice is provided at application and onboarding for any AI-assisted hiring or performance tool
- For New York employees: confirm signed acknowledgment on file and workplace posting visible for any electronic monitoring
- For Delaware employees: confirm one-time or daily electronic notice exists for email/internet monitoring
- For Connecticut employees: set a calendar reminder for October 1, 2026 (WARN Act disclosure trigger) and October 1, 2027 (full employment AI disclosure)
- For Colorado employees: set a calendar reminder for January 1, 2027 and monitor rulemaking for notice format requirements
- Update your employee handbook to include the monitoring notice section
- Train managers on what they can and cannot say about AI tool outputs when discussing employment decisions
What this means for teams that crossed state lines without noticing
The single most common compliance gap on these laws is geography. A 15-person team with a handful of remote employees in Illinois and New York often assumes their home state's law applies to the whole company. It does not. State AI monitoring laws apply based on where the employee works, and every state has its own requirements.
The practical move is to build one notice that covers the most prescriptive requirements across all the states where you have employees, and apply it uniformly. New York and Delaware require the highest disclosure specificity for monitoring tools. Illinois requires the broadest coverage of AI-assisted employment decisions. A notice that satisfies both is a reasonable baseline for multi-state employers.
This will not be the last update to this tracker. Ohio and Minnesota both had AI employment monitoring legislation pending as of mid-2026. New York City's Local Law 144 (automated employment decision tools used in hiring) remains in effect and adds a bias audit requirement on top of the state's monitoring disclosure rule. As state-level AI employment law continues to expand, the gap between "we use AI tools" and "we've disclosed our AI tools" is becoming a compliance issue, not just a policy preference.
Related Reading
- Illinois AI Employment Disclosure Law 2026: Employer Compliance Guide
- Connecticut AI Law 2026 Compliance Checklist
- Colorado AI Act SB 189: What Changed and What Applies
- NYC Local Law 144: AI Bias Audit Employer Guide
- Shadow AI Policy for Small Teams
- AI Governance Checklist 2026
Sources: Illinois HB 3773 via Seyfarth Shaw, Connecticut SB 5 via Nixon Peabody, Colorado SB 26-189 via Greenberg Traurig, Delaware Code Title 19 § 705 via Justia, New York monitoring law via Baker McKenzie.
