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On August 6, 2019, in the case of Texas v. EEOC, the U.S. Court of Appeals for the Fifth Circuit held that the Obama-era Equal Employment Opportunity Commission (“EEOC”) overstepped its authority when it issued a 2012 Guidance Document cautioning employers not to screen job applicants using criminal background checks. The appeals court’s decision narrowly held that the EEOC could not enforce the Guidance against the state of Texas, but it effectively nullified the application of the Guidance to both public and private employers across the country.
The EEOC’s Guidance, purportedly implementing Title VII of the Civil Rights Act of 1964, prohibited employers nationwide from instituting automatic, blanket bans on the hiring of individuals with criminal records. In support of the Guidance, the EEOC cited data suggesting that blanket bans on hiring individuals with criminal records disproportionately impact minorities. In lieu of screening policies directed toward individuals with criminal records, the Guidance required employers to conduct an individualized assessment of whether an applicant’s criminal record would impact his or her ability to perform the position before reaching a hiring decision.
After the EEOC issued the Guidance, the State of Texas sued the EEOC in federal court to prevent the Guidance’s enforcement. By state law, Texas had long excluded persons with felony convictions from most public jobs. In its lawsuit, Texas contended that the EEOC was unlawfully attempting to limit the prerogative of public and private employers to exclude convicted felons from employment. Texas requested a declaration from the Court that it had the right to bar felons from certain jobs. Additionally, Texas sought an injunction preventing the EEOC from enforcing the Guidance against it.
The district court ruled in favor of the State of Texas, finding that the Guidance was a substantive rule that the EEOC lacked legal authority to implement without first providing the public with notice of the proposed rule and opportunity to comment. According to the district court, however, the Guidance could be lawfully re-issued if the public was offered an appropriate opportunity for comment.
On appeal, Texas argued that the district court did not go far enough. Texas claimed that the district court should have held that the EEOC lacked authority to issue the Guidance at all, regardless of whether the public was afforded an opportunity for comment. The appeals court agreed; it held that the EEOC “overstepped its statutory authority” in issuing the Guidance because federal law does not authorize the EEOC to promulgate substantive rules to implement Title VII.
Takeaways for Employers
The appeals court’s decision is a clear setback for the EEOC, but it is not a complete victory for all employers who base hiring decisions on criminal background checks.
Although the Fifth Circuit found the EEOC overstepped its authority in issuing the Guidance, the Court did not declare that Texas or private employers have a categorical right to enforce rules that ban convicted felons from employment. While the decision prevents the EEOC from adopting a rigid position on the lawfulness of applicant screening based on criminal background checks, such policies could still be held to be discriminatory on a case-by-case basis and result in liability to employers in certain cases. Employers must also be mindful that, in addition to Title VII, the Fair Credit Reporting Act and various state laws may impose legal obligations on employers conducting criminal background checks.
The bottom line: the Fifth Circuit’s ruling is a step in the right direction for employers who wish to rely on criminal background checks in hiring and retention decisions; other courts outside the Fifth Circuit will find that Court’s reasoning persuasive. Nonetheless, employers must still exercise caution in the implementation and enforcement of background-check policies and should carefully monitor further legal developments in this area of the law.