By Gerald L. Maatman Jr. and Howard M. Wexler

Earlier this year, the U.S. District Court for the Northern District of Texas dismissed a high profile lawsuit brought by the State of Texas against the EEOC regarding its “Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Under Title VII.  In State of Texas v. EEOC, Case No. 5:13-CV-255 (N.D. Tex. Aug. 20, 2014), the District Court held that Texas lacked standing to maintain its suit because it did not allege that any enforcement action had been taken against it in relation to the EEOC’s guidance.

Texas wasted no time and filed an appeal with the U.S Court of Appeals for the Fifth Circuit seeking to overturn the dismissal of its lawsuit. On November 19, 2014, Texas filed its opening brief in support of its appeal. It is a “must read” for all employers, especially those who have been caught in the EEOC’s “do as we say, not as we do” tactics (given that the EEOC itself conducts criminal background investigations as a condition of employment for all positions, and conducts credit background checks on approximately 90 percent of its positions).

Case Background

In April 2012, the EEOC issued guidance urging businesses to avoid a blanket rule against hiring individuals with criminal convictions, reasoning that such rules could violate Title VII if they create a disparate impact on particular races or national origins. Like various other states, Texas has enacted statutes prohibiting the hiring of felons in certain job categories. In November 2013, Texas sued the EEOC, seeking to enjoin the enforcement of this guidance, which Texas has termed the “Felon Hiring Rule.”

The District Court dismissed Texas’ lawsuit entirely on a lack of subject matter jurisdiction. Because Texas did not allege that any enforcement action had been taken against it by the Department of Justice (as the EEOC cannot bring enforcement actions against States) in relation to the Guidance, the District Court held that there was not a “substantial likelihood” that Texas would face future Title VII enforcement proceedings from the Department of Justice arising from the Guidance. As standing to bring suit cannot be premised on mere speculation the District Court held that Texas lacked the necessary standing to maintain its suit against the EEOC.

Texas’ Appellate Brief

In the opening pages of its Fifth Circuit brief, Texas sets the stage by noting that this case presents “issues of exceptional importance throughout the State of Texas and the Nation” as it concerns the EEOC’s “felon-hiring regulations” which it adopted “without allowing the public to see it or comment on it” and “preempts various state laws that ban employers from hiring felons.” Id. at 7.

Given that the District Court’s dismissal was based entirely on issues of standing, Texas sets forth several reasons why the District Court erred in dismissing the suit on this basis. Specifically, Texas asserts that its lawsuit is not based on the “mere speculation” of injury and that it has standing to pursue its challenge of the “Felon Hiring Rule” because:

  • In processing job applications, Texas state agencies apply various no-felons policies required by state law which are prohibited by the EEOC’s Felon Hiring Rule. The conflict makes the State an “object” of the EEOC’s administrative action thus satisfying the standing requirements of Article III”;
  • The EEOC cannot attempt to both change the State’s hiring policies [through adopting the Felon Hiring Rule] and nonetheless object to the State’s standing to change that attempt;
  • The Rule expressly purports to preempt state law no-felons policies, like those required by Texas law, and as a result, vests Texas with Article III standing to defend its laws;
  • The lawsuit represents a facial challenge to the EEOC’s rule, and because “without federal court intervention, the [EEOC] will be able to continue to use its threat of enforcement to bully employers into abandoning their no-felons policies;
  • The Felon Hiring Rule is a final agency action that is reviewable to the extent that it binds the EEOC’s staff and/or forces regulated entities to change their behavior; and
  • The fact that the Felon Hiring Rule is not a “legislative rule” does not foreclose judicial review since otherwise “agencies like the EEOC could promulgate self-proclaimed guidance documents, use them to bully regulated entities, and forever avoid judicial review of their coercive efforts.”

Id. at 16-19.

Implications For Employers

While the EEOC has yet to file its opposition brief, one can expect it to advance similar arguments that it made in support of its motion to dismiss. Namely, that the District Court lacked jurisdiction to hear the case because the EEOC’s guidance is not legally binding and does not constitute a final agency action and because its guidance has no binding authority, and thus renders Texas without standing to pursue its claims. This is most certainly “one to watch” given the stakes involved and the extent to which the EEOC has “gone to the mat” defending its criminal background guidance document. We will be sure to keep our readers informed as this case makes its way through the appeals process. Stay tuned!

Readers can also find this post on our Workplace Class Action blog here.