Criminal background checks have long been a critical hiring tool, but accessing criminal records is becoming increasingly difficult.
In California, a 2021 court ruling made it more difficult for background screening firms to verify criminal records, leaving employers with fewer ways to assess candidate risk. As a result, some businesses have turned to AI-powered social media screening to fill the gap—using automated systems to flag potential risks based on public online activity.
But California’s Senate Bill 7 (SB 7) could soon change that. If enacted, this legislation would introduce new regulations on automated decision systems (ADS) in employment. The bill would prohibit employers from using ADS to infer criminal or credit history, including through AI-powered social media screening tools.
For employers who rely on background checks to make informed hiring decisions, this law could impact current screening practices. With fewer tools available to assess risk, hiring teams may need to reassess their approach while ensuring compliance with evolving AI regulations.
What is an Automated Decision System?
SB 7 defines an Automated Decision System (ADS) as any computational process that uses machine learning, statistical modeling, data analytics, or artificial intelligence to produce simplified outputs—such as a score, classification, or recommendation—that assist or replace human decision-making and materially impact individuals.
Notably, the bill excludes certain common workplace technologies from this definition, such as spam email filters, firewalls, antivirus software, and identity management tools. This distinction suggests that the bill is not a blanket ban on AI, but rather an effort to regulate how automated systems influence employment decisions, particularly when they replace or supplement human discretion.
New Compliance Requirements for Employers
If passed, SB 7 will introduce significant new obligations for employers that use ADS in hiring or employment decisions.
First, the bill requires greater transparency. Employers using an ADS must notify workers in writing at least 30 days before deploying the system. The notice must explain how the system works, the type of data it uses, and how it impacts employment decisions. Employers must also maintain an updated list of all ADS tools in use.
Beyond disclosure, SB 7 limits how AI can be used in employment decisions. Employers will be prohibited from using ADS to infer sensitive characteristics, including criminal history, immigration status, gender identity, political beliefs, and creditworthiness. This means that AI systems cannot analyze indirect data—such as social media activity, employment gaps, or financial behavior—to make assumptions about a candidate’s background.
The bill also requires human oversight. Employers cannot rely solely on AI-driven outputs for hiring, promotions, discipline, or termination. If an ADS is used, a human reviewer must independently evaluate the system’s conclusions. This introduces a new layer of compliance, requiring businesses to balance efficiency with fairness in hiring decisions.
How SB 7 Could Impact Employers Who Conduct Background Checks
Employers already face significant hurdles in verifying criminal records, and SB 7 could make this even more challenging.
The case All of Us or None v. Hamrick fundamentally changed how background check providers validate criminal records for employers. The ruling prohibited California court records from displaying key identifiers such as date of birth or driver’s license numbers—making it far harder to confirm whether a record actually belongs to a candidate.
While intended to protect privacy, this decision introduced major verification challenges. Employers requesting background checks—particularly for candidates with common names—may find that screening firms cannot confidently determine whether a record belongs to the applicant in question. The removal of identifiers increases the likelihood of both false positives and false negatives, forcing employers to either assume greater hiring risks or seek alternative screening methods.
The Role of AI in Filling the Gaps—And Why SB 7 Challenges It
With access to verifiable criminal records becoming more limited, some employers have turned to AI-powered social media screening as an alternative risk assessment tool. These tools scan publicly available online content to flag potential risks related to categories such as violence, drug use, or financial irresponsibility.
However, SB 7 directly challenges this practice. Employers would no longer be allowed to use ADS tools that infer criminal or credit history from social media activity, even if the system does not explicitly state that it is making such an inference. The prohibition may apply even when AI uses proxy indicators—such as discussions of past legal trouble, affiliations with certain groups, or posts mentioning financial hardship.
This presents significant implications for employers. Companies that previously relied on AI-driven insights to compensate for gaps in criminal record screening may soon find themselves without a legal basis to continue using such tools. Employers who have built AI-powered risk mitigation strategies will need to rethink their approach to avoid compliance pitfalls.
The Future of AI in Hiring Decisions
California’s SB 7 is part of a larger trend in AI regulation, as lawmakers across the country attempt to prevent algorithmic bias and increase transparency in hiring. But for employers, this legislation likely presents more challenges than opportunities.
On one hand, it may increase hiring costs and slow decision-making, requiring greater human oversight at multiple stages. On the other, while aimed at promoting fairness, it adds another layer of regulatory complexity, potentially limiting an employer’s ability to assess candidate risk effectively. While the intent is to reduce bias, the impact of restricting AI tools on hiring fairness and efficiency remains to be seen.
To prepare for these changes, employers should:
- Audit AI-driven hiring tools to determine whether they rely on inferred characteristics rather than verifiable data.
- Review the role of AI in social media screening and assess whether adjusting flagged content categories can reduce compliance risks.
- Develop compliance-first AI strategies that balance transparency, risk mitigation, and legal requirements.
While AI will remain a key part of the hiring process, SB 7 may signal a shift in how employers leverage technology for screening. As regulations evolve, businesses must find ways to balance risk mitigation with compliance, ensuring that hiring decisions remain both effective and legally defensible in an increasingly complex landscape.