New Federal Rules Limit AI Use in Background Checks — What It Means for Expunged Records

The Federal Trade Commission finalized sweeping rules in April 2026 restricting how employers can use artificial intelligence in hiring and background screening. For the millions of Americans with expunged or sealed criminal records, the new rules offer meaningful new protections against AI-driven discrimination.

What the FTC Rule Does

The FTC's new rule, effective July 2026, places strict limits on how employers and background screening companies can deploy AI in employment decisions. Key provisions include:

• Bias audits required: AI tools used in hiring or background screening must undergo independent bias audits annually and disclose results to the FTC
• Disparate impact restrictions: Employers cannot use AI systems that have a disparate impact on protected classes — including people with criminal records — without documented evidence the tool is job-related and consistent with business necessity
• Notice requirements: Job applicants must be notified when AI is used to screen or score them, and told what factors the AI considers
• Human review mandates: Final hiring decisions affecting people with records in the screening process require meaningful human review — not purely automated rejection
• Accuracy standards: Background screening AI must maintain documented accuracy rates and cannot rely on data sources known to contain incomplete or stale records

Why This Matters for Expunged Records

Even after your record is expunged or sealed, the practical protection depends heavily on whether that information actually disappears from the databases employers and screening firms use. The FTC's new rule addresses two longstanding problems:

1. Incomplete Expungement in Commercial Databases

Court records are one source. Commercial background check databases — the kind most employers use — aggregate data from multiple sources and often lag behind actual court orders. A record that was expunged six months ago may still appear in a commercial database search if the screening company hasn't updated its sources. Under the new rule, employers using AI tools that pull from these databases must have documented procedures to verify records against court sources before making adverse decisions.

2. AI Amplification of Old Data

Older AI screening tools used in hiring often trained on historical data that reflected patterns of discrimination. Even when a record is legally expunged, an AI system might flag patterns associated with a person's demographic characteristics rather than the actual record. The new disparate impact provisions specifically target this: employers must prove their AI tools don't disproportionately screen out people with criminal records compared to the general population — and if they do, the employer bears the burden of justifying it.

What You Can Do

If you've expunged your record and believe an employer or background check company violated the new FTC rules, you have several options:

• Request your file: Under the Fair Credit Reporting Act (FCRA), you're entitled to a free copy of everything a background check company has on you. Request it and check for outdated or inaccurate information.
• Dispute errors: If you find records that should have been removed after expungement, dispute them with the screening company directly. The FTC rule requires companies to investigate disputes within 30 days.
• File a complaint: Report potential FTC rule violations at reportfraud.ftc.gov. The FTC has signaled it will prioritize cases involving AI discrimination against people with criminal records.
• Know your state rights: Several states have their own AI-in-hiring laws that layer on top of the federal rule. California's Civil Rights Department, New York's AG office, and Illinois' AI law all provide additional avenues for complaint.

Automatic Expungement + Stronger AI Rules = Better Protection

The combination of automatic expungement laws now covering 14 states and the new FTC AI rules creates a two-layer defense for job seekers with records. Even in states without automatic sealing, the FTC rule means employers and their AI tools face stricter accountability for how they handle expunged records in the hiring process.

If you've been hesitant to apply for jobs because you weren't sure whether your expunged record might still surface, these changes strengthen your position. Keep documentation of your expungement order, check your own background check file before applying, and know that you have legal grounds to push back if an employer improperly uses old or inaccurate data.