New Hiring Laws Reshaping Background Screening

The pace and complexity of hiring continue to evolve, and so do the conversations shaping it. At Collaborate 2026, First Advantage brought together a select group of customers, partners, and guests for exclusive, closed-door discussions on what’s changing and what comes next.¹ This blog outlines a session I led on key developments and implications regarding new local and state legislation.

A more complex compliance landscape is emerging

Across industries, employers are navigating a rapidly expanding web of state and local regulations. While federal frameworks like the Fair Credit Reporting Act (FCRA) and Equal Employment Opportunity Commission (EEOC) guidance remain foundational, they are no longer sufficient on their own.

In many cases, these state and local laws are more burdensome than federal FCRA and EEOC requirements. Many introduce additional notice requirements, stricter timing rules, and expanded candidate protections that go beyond federal expectations.

At Collaborate 2026, one theme was clear: compliance is no longer a static checklist; it’s an ongoing operational challenge. Organizations must now account for:

• Jurisdiction-specific rules that vary widely across states and cities
• Increased enforcement and rising litigation risk
• Expanding requirements across the entire employee lifecycle, not just pre-hire

This shift is forcing employers to rethink how they manage compliance, moving from reactive processes to more proactive, system-driven approaches.

Fair chance laws continue to expand

Fair chance and “ban the box” laws remain among the most active areas of change and among the most complex to manage. Recent updates across jurisdictions highlight how quickly requirements are evolving. For example:

• Texas introduced its first statewide ban-the-box law, delaying criminal history inquiries until later in the hiring process
• Washington State expanded its Fair Chance Act, adding stricter procedural requirements and applying rules to internal mobility
• Philadelphia shortened lookback periods and expanded protections for gig workers
• Spokane, Washington, introduced a first-of-its-kind restriction on asking about address history before an offer

While these laws are designed to reduce barriers to employment, they also introduce new compliance complexity. Employers must carefully manage when and how criminal history can be considered, documentation of individualized assessments, and timing and delivery of pre-adverse action notices. Even small missteps in process or timing can create significant legal exposure.

What this means for employers

Organizations can no longer rely on a single, standardized hiring process. Instead, they need flexible workflows that adapt to local requirements while maintaining consistency and fairness across hiring decisions.

Clean slate laws are changing what employers see

Another major shift discussed at Collaborate 2026 is the rise of clean slate laws. These laws often automatically seal or clear eligible records, though records may still appear temporarily while court systems update and may remain accessible for limited, defined uses. As adoption expands across states like Minnesota, Illinois, Virginia, and Colorado, the impact on screening programs is significant.

For employers, this introduces a new layer of complexity:

• Records that were previously visible may no longer appear
• Screening results may differ over time due to automated record clearing
• Rescreening or monitoring programs may surface inconsistencies

In some cases, records eligible for clearing may still appear temporarily due to delays in court systems updating databases. This creates potential discrepancies that employers must be prepared to interpret carefully.

New regulations are expanding beyond criminal history

While criminal history remains a central focus, compliance requirements are expanding into new areas that impact hiring decisions more broadly.

Credit check restrictions are tightening, with New York introducing one of the most comprehensive bans in the country. The law also restricts background screening agencies from providing credit history unless a specific exemption applies.

Pay transparency and salary history laws are also evolving. Many jurisdictions now prohibit employers from asking about prior compensation while requiring employers to disclose salary ranges in job postings. In some jurisdictions, these restrictions can impact employment verifications, effectively prohibiting employers from requesting documentation such as W-2s or payroll records that contain past salary information.

These changes reflect a broader trend: hiring decisions are being scrutinized across multiple dimensions, not just background checks.

Credit history restrictions are tightening

One of the most significant updates discussed at Collaborate 2026 is the expansion of credit history restrictions, most notably in New York. Effective April 2026, New York State will enact one of the broadest employment credit check bans in the U.S., making it unlawful for most employers to request or use consumer credit history in hiring, promotion, or compensation decisions. This includes not only traditional credit reports and scores, but also broader indicators such as payment history, collections, bankruptcies, and liens.

Importantly, the law also applies to background screening providers, limiting when credit data can even be supplied. Only narrow, role-specific exemptions apply, such as positions involving significant financial authority, trade secrets, or legally mandated checks.

This shift reflects a growing regulatory stance: credit history is increasingly viewed as unrelated to job performance for most roles and therefore inappropriate for broad use in hiring decisions.

Salary history bans are expanding nationwide

At the same time, salary history and pay transparency laws continue to gain momentum across the U.S., with multiple states strengthening enforcement in 2025 and 2026. States including Illinois, Massachusetts, New Jersey, Vermont, and California have expanded or strengthened laws prohibiting employers from asking candidates about prior compensation. These restrictions extend beyond applications and interviews, often covering reference checks and requests for documentation, such as W-2s or payroll records.

In parallel, pay transparency requirements are becoming more common, with employers required to disclose salary ranges in job postings, even for remote roles that may fall under multiple jurisdictions. In some jurisdictions, internal mobility events, such as promotions, may now be treated similarly to new-hire events under applicable laws.

What this means for hiring processes

Together, these changes signal a broader shift in how hiring decisions are regulated. Employers must align so that:

• Screening packages are tailored to jurisdiction-specific restrictions
• Hiring teams are trained on what information can and cannot be requested
• Policies extend beyond pre-hire screening to include promotions, transfers, and internal mobility

What was once considered standard hiring information is now increasingly restricted, requiring more deliberate, compliance-conscious approaches to candidate evaluation.

AI in hiring introduces new compliance risks

One of the most forward-looking topics at Collaborate 2026 was the rise of artificial intelligence in hiring and the regulations that come with it. States and cities are beginning to treat AI-driven hiring tools that make automated hiring decisions as high-risk technologies. Emerging laws aim to prevent a discriminatory impact on candidates as the result of using AI tools in hiring. Some common requirements include:

• Candidate notification when AI tools are used
• Transparency in how decisions are made
• Bias audits and ongoing monitoring
• Access to non-AI alternatives in some cases

Jurisdictions like New York City, Colorado, and California are leading the way, setting expectations that are likely to expand nationwide. These laws increasingly treat AI-driven automated decisioning tools as high-risk technologies requiring governance, transparency, and bias monitoring.

From compliance burden to strategic advantage

These changes are increasing operational complexity for employers, particularly those hiring across multiple jurisdictions. While the growing complexity of hiring laws presents challenges, it also creates an opportunity. Organizations that invest in integrated, adaptable screening processes are better positioned to:

• Respond quickly to regulatory changes
• Help reduce compliance risk and litigation exposure
• Improve consistency across hiring decisions
• Build greater trust with candidates and employees

The key takeaway from Collaborate 2026 is that compliance is no longer just about avoiding risk. Today, it’s about enabling smarter, more confident hiring decisions.

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