The legal showdown between the State of Texas and the Equal Employment Opportunity Commission (EEOC) over the agency’s background check guidance took another turn on September 23, 2016, when the Fifth Circuit Court of Appeals issued an order withdrawing its previous June opinion and remanding the case to U.S. District Court for the Northern District of Texas. The June 2016 opinion had allowed Texas to proceed with its lawsuit against the EEOC. This order comes on the heels of the Supreme Court’s recent decision in United States Army Corps of Engineers v. Hawkes Co., Inc., 136 S.Ct. 1807 (2016), which examined when a federal agency’s decisions can be challenged in court. This new development calls into question whether the State of Texas can proceed with its lawsuit against the EEOC.
Background
In April 2012, the EEOC issued its Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act of 1964 (Guidance). This Guidance advised employers using criminal background checks to ensure that the consideration and use of conviction information should be (1) job-related and (2) consistent with business necessity. Among other things, the Guidance implied that employers should engage in a targeted screening process when considering an applicant or employee’s criminal conviction record, and conduct an individualized assessment before taking an adverse action.
In November 2013, the State of Texas was the first to challenge the Guidance in a suit against the EEOC seeking to enjoin enforcement of the Guidance. The EEOC filed a motion to dismiss the action for lack of subject matter jurisdiction, which the U.S. District Court for the Northern District of Texas granted on August 20, 2014 (finding Texas lacked standing to maintain its suit). Texas appealed that decision to the Fifth Circuit, which reversed and remanded the case on June 27, 2016—thus allowing Texas to go forward with its challenge of the EEOC Guidance. In reaching this decision, the Fifth Circuit ruled that the Guidance was a “final agency action” for purposes of the Administrative Procedure Act (APA), thereby allowing Texas to directly challenge the Guidance in court.
On May 31, 2016, the Supreme Court issued a decision in United States Army Corps of Engineers v. Hawkes, 136 S.Ct. 1807 (2016), an unrelated case, in which a company challenged a decision made by the Army Corps of Engineers under the APA. In a procedurally-heavy decision, the Supreme Court laid out specific factors to be considered by a court when deciding whether an agency decision is a “final agency action.”
The Fifth Circuit’s September 23, 2016 Order
Given the Supreme Court’s guidance in Hawkes (as well as the Court’s treatment of other lawsuits brought under the APA since then), the Fifth Circuit issued a new order on September 23, 2016, that (1) withdrew its June 27, 2016, opinion granting Texas standing to proceed with its lawsuit, (2) vacated the district court’s earlier judgment dismissing the complaint (which had been overruled by the Fifth Circuit’s June 27, 2016, decision), and (3) remanded the case back to the district court, so that the lower court could rehear the matter in light of Hawkes. Thus, once again, the case hinges on the question of whether Texas can properly challenge the Guidance under the APA.
Employer Implications
Although Texas’ challenge to the Guidance remains viable, it is unclear whether the U.S. District Court for the Northern District of Texas (which has already ruled once against Texas) will allow the lawsuit to proceed. Even though the future of the Guidance remains up in the air, we anticipate the EEOC will continue to use and rely upon the Guidance. Therefore, employers should continue to follow it. We will continue to provide updates to this case as the proceedings continue in the district court.
All federal and state background check requirements are summarized in Ogletree Deakins’ OD Comply: Background Checks and OD Comply: Employment Applications subscription materials, which are updated and provided to OD Comply subscribers as the law changes.
