On August 6, 2019, in State of Texas v. Equal Employment Opportunity Commission, the United States Court of Appeals for the Fifth Circuit ruled that the Equal Employment Opportunity Commission (“EEOC”) exceeded its authority in issuing its Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions under Title VII of the Civil Rights Act of 1964 (the “Guidance”). In so ruling, the Fifth Circuit found that the EEOC does not have rule-making or enforcement authority to require that employers conduct job-relatedness assessments of their candidates’ criminal histories as part of the background check process.
In April 2012, the EEOC issued the Guidance, which outlined the EEOC’s guidelines regarding the use of arrest or conviction records in employment decisions. The Guidance stated that an “employer’s use of an individual’s criminal history in making employment decisions may, in some instances, violate the prohibition against employment discrimination under [Title VII].” More specifically, the EEOC stated that employers’ reliance on arrest and conviction records may have a disparate impact on people based on race or national origin. The result was that employers were advised to be more careful about basing hiring decisions on applicants’ criminal records. Among other requirements, employers were instructed to conduct an individualized assessment and to communicate with an applicant before disqualifying the applicant based on criminal history.
District Court Decision
In November 2013, a year after the Guidance was issued, the State of Texas sued the EEOC alleging that the Guidance was unlawful. In that case, a Texas individual whose employment application was rejected by the Texas Department of Public Safety, had filed an EEOC charge claiming that the department’s ban on former felons violated Title VII and the Guidance. In suing the EEOC, Texas argued, in part, that the EEOC did not have the authority to draft and enforce substantive rules on employers and that the State could exclude felons from its employment in certain positions lawfully. In its suit, Texas brought a claim under the federal Declaratory Judgment Act (“DJA”) asking for a declaration that it be allowed to enforce its laws that bar the hiring of convicted felons for certain positions. Texas also sought an injunction and brought another claim under the Administrative Procedure Act (“APA”) asking the court to set aside the Guidance. Texas argued that the Guidance exceeded the EEOC’s power under Title VII, was “promulgated without notice and comment in violation of the APA,” and was “substantively unreasonable.”
The district court ultimately issued a ruling that was appealed by both Texas and the EEOC. The court issued an injunction temporarily enjoining the Guidance because it found that the Guidance was a substantive rule that could not be implemented before notice was provided to the public and an opportunity was given for public comment. In addition, the district court “decline[d] to declare that Texas has a right to maintain and enforce its laws and policies that absolutely bar convicted felons (or certain categories of convicted felons) from serving in any job that the State and its Legislature deemed appropriate” and found “categorical denial of employment opportunities to all job applicants convicted of a prior felony paints with too broad a brush and denies meaningful opportunities of employment to many who could benefit greatly from such employment in certain positions.” The district court also did not hold that the EEOC could not in any circumstance issue a substantive rule and refused Texas’ request to enjoin the EEOC from issuing right-to-sue letters based off a claimant’s criminal history.
Fifth Circuit Decision
On appeal, the Fifth Circuit agreed with Texas that the Guidance is a substantive rule and that the EEOC lacked authority to issue substantive rules that implement Title VII. The Fifth Circuit upheld the district court’s injunction, but modified it to remove the clause “until the EEOC has complied with the notice and comment requirements under the APA for promulgating an enforceable substantive rule.” Accordingly, the EEOC and the Attorney General are permanently prohibited from enforcing the EEOC’s interpretation of the Guidance against the State of Texas. The Fifth Circuit denied consideration of Texas’ DJA claim.
The Bottom Line
Although the injunction applies only to EEOC actions against the State of Texas, the Fifth Circuit’s opinion could provide a basis for private employers, especially within the Fifth Circuit (Texas, Louisiana, and Mississippi), to challenge the Guidance and defend their background check procedures. However, it is not clear whether other courts will agree with the Fifth Circuit’s analysis and/or whether the EEOC will provide any commentary on the decision. Also, it is notable that the Fifth Circuit’s decision did not address the merits of the EEOC’s Guidance; it was based solely on the fact that the agency did not have the authority to promulgate the Guidance. Thus, the underlying principles stated in the Guidance could still be considered by courts, and employers should continue to use caution in their employment screening process. Because of this uncertainty, it remains a best practice to conduct an individualized assessment before disqualifying the applicant based on criminal history. Employers should also continue to comply with the Fair Credit Reporting Act and “ban the box” laws with respect to their background check procedures.