Taking the challenges introduced by artificial intelligence into its own hands, Colorado just introduced new legislation to put a stop to wage setting based on AI surveillance. Tackling a problem that many may not have seen coming, Colorado’s AI bill doesn’t exclusively apply to wage decisions but instead addresses the problem of “surveillance pricing,” where AI and algorithm models may be utilized to gather information about an individual in order to present them with differential offers and prices.
Unregulated automated decision systems present a serious threat to the global population, where organizations can treat consumers or employees differently based on data often gathered without their knowledge. Many businesses have already been accused of using such discriminatory tactics against shoppers to present them with higher prices on the basis of gathered data, and Colorado’s AI transparency framework preemptively prohibits employers from doing the same with employees. While the Colorado AI surveillance and wage-setting regulation doesn’t prevent the use of automated systems or AI-based surveillance of individuals, it is a step in the right direction towards setting safeguards against differential treatment in employment.
Colorado is working to regulate AI-based surveillance pricing and associated wage setting, requiring employers to prioritize transparency in pay. (Image: Pexels)
Colorado Announces Legislation to Prevent Wage Setting Based on AI Surveillance, Setting the Standard for Global Consideration
House Bill 1210 was passed in the Senate with a 19-15 vote on Wednesday, and its regulation of AI-based wage setting is important for employers to understand. The bill defines surveillance data as information “obtained through observation, inference, or surveillance of consumers or workers and that is related to personal characteristics, online behaviors, or biometrics of an individual or group, band, class, or tier to which the individual belongs.”
In practice, HB26-1210 prevents discrimination against consumers and workers through the use of a price or wage setting algorithm (PWSA) that relies on statistical modeling, data analytics, AI, or data processing techniques to analyze surveillance data for individualized price or wage setting.
In effect, residents of Colorado cannot use surveillance data to determine the amount charged to a consumer or the wages offered to a worker.
Algorithmic Wage Setting Is a Serious Threat to Fairness in Employment
Surveillance pricing in consumer markets has garnered considerable attention in recent months, with conversations growing around differential product pricing for customers based on their earnings, habits, needs, and background details that should not factor into the standard market price of a product. With the advent of AI, it has become considerably easier to assimilate and “weaponize” information against consumers, and guardrails on these applications of technology have been slow to come.
Some business leaders argue that regulating these systems will make it harder for them to present better offers and discounts to consumers, marketing this surveillance pricing system as one that is advantageous to buyers. The misuse of these systems, however, far outweighs the benefits. As was seen during the legislative debate, surveillance pricing systems have been used to charge higher airline prices for those searching for funeral arrangements, as their travel plans were expected to be non-negotiable. Similarly, employers could offer lower wages to workers searching for information on aspects like loans and lawyers, as they were likely to accept any form of employment given their circumstances.
Wage setting based on AI and surveillance data presents a serious threat to fairness in employment, giving employers the added advantage of offering the lowest wages possible to a new hire by accumulating background data and exploiting their circumstances. While there is limited data on just how often such tactics are currently used in employment, Colorado’s AI surveillance and wage-setting regulations will now limit the misuse of data, much of which is not shared voluntarily or with the knowledge of the candidate.
Colorado’s AI Bill Still Needs to Be Signed Into Effect
The algorithmic wage setting and AI surveillance bill has been passed by Colorado legislators, but Gov. Jared Polis still has the power to veto the bill over the next 30 days or sign it into law. His decision may determine the fate of the bill and the work of similar legislation in and outside of Colorado. A previous AI regulation on the use of automated systems in hiring still hangs in the balance after its implementation was delayed from February to the end of June.
As the work of these legislations progresses, employers also need to reevaluate their own systems and take measures to ensure their existing systems cannot be seen as violating upcoming changes in policy. From inception to the final nature of the bill, there have been changes made to the language and terms of regulations, which are important to review and understand clearly.
Additionally, HB26-1210 also requires those who use price or wage setting algorithms to develop and publish reasonable procedures to ensure accuracy of data, and create avenues to allow workers to request and receive information about collected data and challenge it if deemed necessary. Such considerations require employers to set an additional system in place for access to information, requiring a comprehensive system of disclosure.
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