June 2026 Compliance Update: Fair Chance Laws, Clean Slate Reforms, and AI Hiring Risk

The first half of 2026 has brought a significant wave of employment compliance developments, and the pace is not slowing down. From sweeping fair chance law expansions in Washington State and Philadelphia to landmark automatic record sealing laws taking effect in Illinois and Virginia, employers are navigating a rapidly shifting legal landscape. At the same time, Colorado has enacted a new AI in hiring law that imposes real, operational obligations on employers using automated decision-making technology in their workforce processes. This month’s update covers the key developments your organization needs to know and act on.

Fair Chance Laws

Washington State: Fair Chance Act Expansion (HB 1747)

Effective Dates: July 1, 2026 for employers with 15 or more employees; January 1, 2027 for employers with fewer than 15 employees.

Washington has raised the bar substantially for how employers may use criminal history in hiring decisions. This expansion applies statewide (not just in Seattle, which has had similar requirements in place for some time) and represents one of the most comprehensive fair chance frameworks in the country. If you are hiring in Washington, the time to audit and update your screening process is now.

Who is covered? The law applies to all employers in Washington State, regardless of industry, on the phased timeline noted above. Both employees and job applicants are protected. The law’s primary framework is structured around the employer-employee and employer-applicant relationship; businesses that rely heavily on independent contractors should consult legal counsel to confirm their specific obligations under the statute.

What does the law require? The most significant change is a timing requirement: criminal background checks may only be initiated after a conditional offer of employment has been extended. This is a stricter standard than the previous framework, which permitted checks once an applicant was deemed “otherwise qualified.” Under the new law, an actual offer must come first.

Beyond timing, the law prohibits employers from taking any adverse action based on arrest records (including pending charges) or juvenile conviction records. Blanket exclusion policies (those that categorically disqualify any applicant with a criminal history) are expressly prohibited.

When a conviction record is deemed relevant to a position, employers must conduct and document an individualized assessment demonstrating that their decision is tied to a legitimate business reason directly related to the role. Employers are also required to hold the position open for at least two business days after providing the applicant with a pre-adverse action notice, giving the individual an opportunity to submit context, evidence of rehabilitation, or corrections to any errors in the report. If an applicant voluntarily discloses criminal history before an offer is made, the employer must immediately provide written notice of the applicant’s rights and a copy of the State Attorney General’s Fair Chance Act guide.

What are the penalties? Penalties have increased substantially under the new law, from $1,500 up to $15,000 per violation, enforced by the State Attorney General’s Office.

Philadelphia, Pennsylvania: Fair Criminal Record Screening Standards Ordinance (FCRSSO) Amendments

Effective Date: January 6, 2026 (now in effect; many employers are still working toward full compliance)

Philadelphia’s ban-the-box ordinance has been in place for years, but the amendments signed by the Mayor on October 8, 2025 represent the most operationally detailed update the city has made to date. If you are hiring in Philadelphia and have not yet conducted a thorough audit of your screening process, compliance in this jurisdiction should be an immediate priority.

Who is covered? The ordinance applies to any private employer operating within the geographic boundaries of Philadelphia with one or more workers in the city. Critically, the amendments explicitly expanded coverage to include independent contractors, rideshare and transportation network drivers, and gig economy workers. Businesses relying on contract or platform-based labor in Philadelphia are squarely within scope.

What does the law require? Several meaningful changes are now in effect:

• • Reduced misdemeanor lookback period: The lookback period for misdemeanor convictions has been reduced from seven years to four years. Older misdemeanor records may not be considered in employment decisions. The seven-year lookback for felony convictions remains unchanged.
• • Summary offenses excluded: Minor infractions such as traffic violations or disorderly conduct are now completely off the table and may not factor into hiring decisions.
• • Expunged and sealed records prohibited: If such a record appears on a background check report, employers must give the applicant the opportunity to present documentation confirming the record was cleared.
• • Strengthened individualized assessment: Employers must apply a “reasonable person” standard when evaluating risk. The assessment must weigh the nature and gravity of the offense, time elapsed, the nature of the job, and evidence of rehabilitation, which now explicitly includes completion of treatment programs, educational achievement, and community involvement.
• • Job advertisement disclosures: If a job posting mentions that a background check may be conducted, it must also state that an individualized assessment will take place.
• • Anti-retaliation protections: A robust anti-retaliation provision has been added, protecting applicants and employees who exercise their rights under the ordinance.

Thorough documentation of all employment decisions involving criminal history is strongly advised.

What are the penalties? Civil penalties range up to $2,000 per violation, payable to the City of Philadelphia. A private right of action also exists: individuals may sue an employer if the Philadelphia Commission on Human Relations dismisses their complaint after one year. Recoverable damages include compensatory damages, liquidated damages equal to other monetary damages awarded (effectively doubling the financial exposure), and attorneys’ fees and court costs.

Clean Slate Laws

Illinois: Clean Slate Act (HB 1836)

Effective Dates: Key provisions take effect June 1 and June 30, 2026; automatic sealing infrastructure development begins July 1, 2026; full automated sealing of existing records begins January 1, 2029.

Illinois Governor Pritzker signed the Clean Slate Act into law on January 16, 2026, making Illinois the 13th state to adopt automatic criminal record sealing. For employers and background screening providers, this development carries immediate implications for how criminal history data will appear in Illinois background checks over time.

Who is affected? The Clean Slate Act is primarily a record-relief law for individuals with qualifying criminal histories, but its downstream impact falls squarely on employers who rely on background checks. All employers hiring in Illinois should understand that certain records previously visible in screening results will gradually become inaccessible. The law is estimated to cover approximately 1.74 million Illinois adults. The sealing effect applies equally regardless of the nature of the work relationship; records that are sealed are inaccessible to both the public and private sectors.

What does this mean for background screening? The Act creates a system of automatic record sealing for eligible non-violent offenses; individuals no longer need to petition a court to have qualifying records removed from public access. Beginning June 30, 2026, waiting periods for petition-based sealing are reduced from three years to two years for misdemeanor and ordinance convictions, lowering the barrier for more individuals to seek relief sooner. Dismissed cases, acquittals, and arrests without conviction will be sealed automatically once the case concludes.

The Illinois State Police will begin upgrading its systems on July 1, 2026, with full automated sealing of existing records rolling out starting January 1, 2029, and a final wave of older records (dating to 1970) expected to be completed by 2034.

In practical terms, employers should anticipate that background check results for Illinois records will increasingly reflect this clean slate over time. The absence of a record does not necessarily mean an individual has no criminal history; it may simply mean that history is no longer legally accessible. ClearStar will keep clients informed as sealing milestones are reached and as data availability from Illinois sources evolves.

Virginia: Clean Slate Law

Effective Date: July 1, 2026

Virginia’s Clean Slate Law, originally passed in 2021 and delayed from its initial 2025 effective date, is now set to take effect on July 1, 2026. This is a landmark shift for Virginia, which historically did not permit conviction records to be sealed at all. For the first time, certain convictions (not merely non-convictions) can be removed from public view.

Who is affected? The law creates record relief opportunities for individuals with qualifying Virginia criminal histories. For employers, the corresponding impact is that certain records currently visible in background checks will become restricted over time. Records sealed under this law are inaccessible to private employers, landlords, and background check providers; law enforcement retains limited access. There is no carve-out for independent contractor relationships; sealed records are sealed regardless of the nature of the work being considered.

What does this mean for background screening? Virginia’s Clean Slate Law establishes two pathways for record relief:

• • Automatic sealing applies to certain qualifying misdemeanor convictions and non-convictions once statutory waiting periods are met, typically seven years from the date of conviction for misdemeanors, with no petition required.
• • Petition-based sealing allows individuals to ask a circuit court to seal certain other misdemeanor convictions and some lower-level felonies (primarily Class 5 and Class 6 felonies and non-violent larceny offenses), subject to eligibility criteria and clean-record requirements.

Higher-level felonies, violent offenses, and offenses such as DUI and domestic assault generally remain ineligible for sealing.

Implementation will be staged; the Virginia State Police has a timeline extending beyond July 1, 2026 for transmitting the initial list of eligible records to circuit clerks, meaning changes to what appears in background checks will roll out gradually rather than all at once. Employers hiring in Virginia should anticipate that the landscape of available criminal history data will shift over the coming months and years. ClearStar will monitor these changes closely and provide updates as records begin to be restricted in Virginia’s systems.

AI in Hiring Legislation

Colorado: AI in Hiring — Senate Bill 26-189

Effective Date: January 1, 2027 (Note: Enforcement currently subject to ongoing litigation — see below)

Colorado has become the first state to enact a dedicated AI in hiring law aimed squarely at employers using automated decision-making technology in workforce processes. After significant resistance from the tech industry and an unprecedented intervention by the Department of Justice in efforts to invalidate the original version of the law, Colorado scrapped its initial framework and replaced it with Senate Bill 26-189, signed by Governor Jared Polis on May 14, 2026. The new law is meaningfully leaner than what it replaced, but it still carries real compliance obligations that employers should begin preparing for now.

Who is covered? SB 26-189 imposes obligations on both developers (creators) and deployers (users, including employers) of AI systems. Notably, the law explicitly extends to workers in a way that Colorado’s general privacy law does not. The term “consumer” expressly includes employees and Colorado resident job applicants, reaching workforce decisions that the Colorado Privacy Act largely excludes. Employers hiring for Colorado-based roles should also be aware that the law reaches out-of-state applicants: if someone is a Colorado resident applying for a Colorado position, they are covered regardless of where the employer is headquartered. As for independent contractors, the law focuses on “consequential decisions” affecting individuals in the employment context broadly; legal experts advise reviewing the scope carefully with counsel, as coverage is defined by the nature of the decision rather than strictly by employment classification.

What does the law require? The law establishes three core obligations for employers:

• • Pre-use notice: Before using covered automated decision-making technology (ADMT) for employment decisions, employers must notify applicants and employees that such technology is being used and provide a mechanism for obtaining additional information about how it works.
• • Adverse action and human review: When an adverse employment decision occurs (such as a decision not to hire), employers must provide additional disclosures within thirty days, including a plain-language explanation of the decision and how ADMT informed it. Applicants and employees may request the personal data used in the decision and require correction of any inaccurate information. Individuals who are adversely impacted also have a limited right to request a secondary human review and reconsideration of their candidacy. Employers are only required to provide human review “to the extent commercially reasonable,” offering flexibility where reconsideration would disrupt business operations, such as when a role has already been filled.
• • Record retention: Employers must retain relevant records for a minimum of three years.

What the law eliminated: The prior version of Colorado’s AI law would have required employers to conduct impact assessments, implement risk management programs, and build anti-discrimination safeguards by June 30, 2026. All of that has been removed. There is no duty of reasonable care, no algorithmic discrimination notice to the attorney general, no risk management program requirement, no impact assessment, and no standalone obligation to inform individuals they are interacting with AI.

Enforcement and the litigation cloud: The attorney general retains exclusive enforcement authority; there is no private right of action. The law provides a 60-day cure period following notice of a violation. That said, the Colorado AI Act is currently on hold with no firm enforcement date, as ongoing federal litigation over the original law casts uncertainty over when and whether SB 26-189 will ultimately be enforced. Employers should monitor this space closely but would be wise to begin preparing for compliance regardless, given the January 1, 2027 effective date on paper.

Practical takeaways for employers: If you use any AI or algorithmic tool to screen, rank, score, or otherwise influence hiring, promotion, compensation, or termination decisions involving Colorado employees or applicants, this law applies to you. The compliance footprint is manageable: update your notice practices, build a process for post-adverse-action disclosures, establish a human review pathway, and ensure your record retention policy covers at least three years. The window to implement these requirements ahead of January 1, 2027 is relatively short. ClearStar will continue tracking both the rulemaking process and the federal litigation as this area of law continues to evolve rapidly.

Looking Ahead

The developments covered in this update share a common thread: the legal expectations around how employers collect, evaluate, and act on information about job candidates continue to rise, whether that information comes from a traditional background check, a sealed court record, or an automated hiring algorithm. Staying ahead of these changes requires both an understanding of the evolving legal landscape and a screening partner who monitors it closely on your behalf.

As always, ClearStar encourages employers to consult qualified legal counsel regarding their specific compliance obligations. Questions about how these developments affect your current screening program? Reach out to your ClearStar account representative.

This update is provided for informational and educational purposes only. It does not constitute legal advice. Employers are encouraged to consult qualified legal counsel regarding their specific compliance obligations.

At ClearStar, we are committed to your success. An important part of your employment screening program involves compliance with various laws and regulations, which is why we are providing information regarding screening requirements in certain countries, region, etc. While we are happy to provide you with this information, it is your responsibility to comply with applicable laws and to understand how such information pertains to your employment screening program. The foregoing information is not offered as legal advice but is instead offered for informational purposes. ClearStar is not a law firm and does not offer legal advice and this communication does not form an attorney client relationship. The foregoing information is therefore not intended as a substitute for the legal advice of a lawyer knowledgeable of the user’s individual circumstances or to provide legal advice. ClearStar makes no assurances regarding the accuracy, completeness, or utility of the information contained in this publication. Legislative, regulatory and case law developments regularly impact on general research and this area is evolving rapidly. ClearStar expressly disclaim any warranties or responsibility or damages associated with or arising out of the information provided herein.