There was a positive development this week in Texas v. EEOC.  The U.S. Court of Appeals for the 5th Circuit reversed and remanded the district court’s dismissal of Texas’ complaint challenging the EEOC’s guidance on the use of criminal histories for employment checks.   The Court ruled 2-1 that the state has standing to challenge the guidance, yet the court recognized the larger issues at stake.  “Although this appeal presents only a jurisdictional issue, this action ultimately seeks to question whether a bar on hiring felons constitutes an unlawful employment practice under Title VII of the Civil Rights Act of 1964…”

In the wake of the EEOC’s 2012 guidance on the use of criminal histories for employment, the State of Texas, in 2013, sued the EEOC seeking declaratory judgment that (1) the EEOC guidance interferes with a number of Texas’ legal barriers to felons applying for certain positions; (2) that the guidance violates the APA; and (3) that the guidance cannot subrogate the state’s sovereign immunity. 

The opinion, reversing and remanding, was written by Judge E. Grady Jolly and joined by Judge W. Eugene Davis.  In strong dissent was Judge Patrick Higginbothem.  All three judges were appointed by President Reagan. 

The district court dismissed Texas’ suit noting that the state lacked standing, the case was not ripe, and there was an absence of subject matter jurisdiction.  The appellate court found that Texas, as an employer, is the “object of the Guidance at issue” and has standing to bring a claim. Oddly, the EEOC claimed that the state could not bring an action under the Guidance because the Guidance has no “legal consequences”.  This position, taken in the district and appellate court levels, left us wondering what the point of the guidance was in the first place if it is devoid of legal consequences.  The court took this argument head-on.  The court wrote that “[i]n defending the Guidance against the scrutiny of the federal courts, the EEOC comes down hard and often on the mantra that the Guidance is not final”, but the Guidance “is a blanket policy that the EEOC has committed itself to applying with respect to virtually all public and private employers.”  The court added that

to hold that the Guidance is not ‘final agency action’ solely because of the EEOC’s limited enforcement authority with respect to a state employer is essentially to hold that there is no rule-related EEOC action against a state that is reviewable under the APA, even though the EEOC clearly can subject state employers to harms sufficient to confer Article II standing.

In addressing a long-standing complaint by CDIA and others in the business community that the Guidance is actually a rule in violation of the APA, the court went partway.  The court said that the Guidance is a “final agency action” under the APA, but whether the EEOC violated the APA is a “conclusion has yet to be determined”. 

Judge Higginbotham filed a strong dissent in which he argued that the challenge to the EEOC by the State of Texas is “nakedly political,” and the State of Texas should not be permitted to challenge “Enforcement Guidance” that the EEOC lacks the ability to enforce against the State of Texas.

A SeyfarthShaw blog called this case  

’one to watch,’ “especially now that the case is remanded to the district court, where the State of Texas is anticipated to challenge [what Texas calls the] “Felon Hiring Rule” created by the EEOC’s Guidance.  Likewise, the EEOC is anticipated to continue its staunch defense, positioning the parties for future clashes.  The EEOC’s positions, which thus far have included admissions that the Guidance is not ‘legally binding’ and does not carry any ‘legal consequences,’ stand to provide employers with additional defenses when faced with the EEOC’s own investigations or prosecutions relating to criminal background checks.