By Rob Whittet, Agency Partner | CO License #342852
Two Colorado laws are changing what employer liability actually means for business owners across Denver, Centennial, and the rest of the state, and neither one is primarily about the coverage most owners think of first. HB 25-1001 already exposes owners who hold 25 percent or more of a business to personal liability for wage and hour violations, separate from whatever liability the business entity itself carries. SB 26-189, signed in May 2026 and taking effect January 1, 2027, adds new notice and disclosure obligations for any employer using automated tools in hiring, promotion, compensation, or scheduling decisions. Neither law changes what a standard commercial policy covers on paper. Both change who can be named in a claim and what your broker needs to know about your business to structure coverage correctly.
HB 25-1001: Colorado Business Owners Can Now Be Personally Liable for Wage Claims
Colorado’s Wage Act previously defined “employer” the same way federal wage law does, which generally left individual owners insulated unless a court pierced the corporate veil. HB 25-1001 changed that. Effective August 6, 2025, the law expanded the definition of employer under the Colorado Wage Act to include any individual who owns or controls at least 25 percent of an employer entity’s ownership interest, exposing that person to personal liability for the entity’s wage and hour violations. The only exception applies to minority owners who fully delegate day-to-day operational control. A separate provision of the same law raised the Colorado Department of Labor and Employment’s jurisdiction to investigate wage claims from $7,500 to $13,000 per claim, effective July 1, 2026.
For a business with one or two owners holding significant equity, this is not a theoretical exposure. A wage and hour claim that once named only the business now potentially names the individual owner as well, and a personal liability finding does not care whether the business carried adequate coverage. The relevant question for most owners is not whether their business insurance responds to a wage claim. Standard general liability, a business owner’s policy, and workers’ compensation are not designed to and do not. The relevant question is whether the coverage structure protects the owner personally when a claim reaches them as an individual, which is the distinction between standalone employment practices liability insurance and a management liability package that adds directors and officers coverage.
SB 26-189: Using AI in Employment Decisions Now Carries New Compliance Obligations
Colorado signed Senate Bill 26-189 into law on May 14, 2026, replacing a broader 2024 AI law that was delayed twice and never took effect. SB 26-189 takes effect January 1, 2027, and regulates what the law calls automated decision-making technology, meaning any tool that processes personal data and generates an output used to make or materially influence a consequential decision. Employment decisions are explicitly covered, including hiring, termination, promotion, compensation, and scheduling. If your business uses software to screen resumes, rank candidates, flag scheduling conflicts, or support compensation decisions, that tool likely falls within the law’s scope once it takes effect.
The obligations are narrower than the 2024 law they replace. Covered employers must give employees and applicants notice before using such a tool in a consequential decision, and if the decision has an adverse outcome, provide a plain-language explanation within 30 days along with a path to request human review. SB 26-189 does not create a new private right of action, so an employee generally cannot sue directly under this law the way they could under, for example, the Colorado Anti-Discrimination Act. What the law does not change is more important for insurance purposes than what it does. A hiring or termination decision that turns out to be discriminatory is still a discrimination claim under existing Colorado and federal law regardless of whether AI software was involved, and that claim still falls squarely within what employment practices liability insurance is built to cover.
What This Means for Your Business Insurance Program
Start with ownership structure. Most closely held businesses across Denver, Centennial, and the surrounding metro have one or two owners well above the 25 percent threshold, which means the owners themselves are now inside the definition. If you or a business partner owns 25 percent or more of the company, ask your broker directly whether your current coverage would respond if you personally, not just the business, were named in a wage and hour claim. For many owners, this is the point where a standalone employment practices liability policy stops being sufficient and a management liability package, which adds directors and officers coverage, becomes worth pricing out.
Then look at how your business actually makes employment decisions. If any hiring, scheduling, promotion, or compensation process runs through software that scores, ranks, or recommends outcomes, tell your broker before your next renewal, not after a claim. It is not a new coverage requirement by itself, but it is new underwriting-relevant information, and a broker who knows you use these tools can flag whether your policy language and limits still fit how your business actually operates.
Finally, revisit your liability limits generally. Personal liability exposure for owners is a meaningful reason to evaluate whether a commercial umbrella policy extending your underlying liability limits, including employment practices liability in some program structures, makes sense now even if it did not two years ago.
When These Laws Take Effect
HB 25-1001’s core provisions, including the expanded definition of employer and personal liability exposure for 25 percent owners, have been in effect since August 6, 2025. The increase in CDLE’s wage claim jurisdiction to $13,000 took effect July 1, 2026, and is already active. SB 26-189 is signed into law but does not take effect until January 1, 2027, and the Colorado Attorney General’s office has indicated it will not begin enforcement until required rulemaking is complete. Businesses have a real window to prepare rather than react.
Why Colorado Businesses Choose an Independent Broker
The Brokerage Insurance Group works with more than 30 A-rated carriers to build employer liability coverage that reflects how a business is actually owned and operated, not a generic policy assembled before these laws existed. Rob Whittet and Jarrett Schinbeckler bring more than 30 years of combined experience helping Colorado business owners understand how legislative changes like HB 25-1001 and SB 26-189 actually affect their coverage, not just their compliance paperwork.
Frequently Asked Questions
Does my EPLI policy protect me personally if I am sued under Colorado’s new Wage Act ownership rule?
Standalone employment practices liability insurance is written to protect the business entity, and coverage for an individual owner named personally in a wage claim depends on the policy’s specific insured definitions. Owners with 25 percent or greater equity should confirm with their broker whether their current structure, or a management liability package that adds directors and officers coverage, actually protects them as an individual.
Does Colorado’s new AI employment law create a new lawsuit risk for my business?
SB 26-189 itself does not create a new private right of action, so it does not directly expose employers to new lawsuits on its own. It does add notice and disclosure obligations for covered employers, and any employment decision made with AI assistance that turns out to be discriminatory remains fully actionable under existing Colorado and federal anti-discrimination law, which is the coverage employment practices liability insurance already addresses.
When do HB 25-1001 and SB 26-189 actually take effect?
HB 25-1001’s expanded personal liability provisions for business owners have been in effect since August 6, 2025, and its wage claim jurisdiction increase to $13,000 took effect July 1, 2026. SB 26-189 was signed into law on May 14, 2026, but does not take effect until January 1, 2027.