Court rules EEOC Overstepped its authority with background check guidance

Pursuant to state law as well as the policies of individual state agencies, the state of Texas has a long history of excluding individuals with felony convictions from many state jobs. For example, the Texas Department of Public Safety and the Texas Department of Aging and Disability Services exclude all convicted felons from employment.

After the issuance of the Guidance, Texas was notified that an applicant who was unsuccessful in obtaining a position with the Department of Public Safety had filed a complaint with the EEOC on the basis of Texas’s no-felon hiring policy. Texas then filed a lawsuit against the EEOC seeking a declaration from the court “of its right to maintain and enforce its laws and policies that absolutely bar convicted felons (or particular categories of convicted felons) from” specified jobs. Texas also sought an injunction stopping the EEOC from enforcing “the interpretation of Title VII that appears in its Felon-Hiring Rule….” Further, Texas asked the court to set aside the Guidance because the EEOC violated its authority in issuing the Guidance.

Court’s Decision

The Fifth Circuit ultimately ruled in Texas’s favor. The Fifth Circuit noted that while the EEOC can issue procedural regulations implementing Title VII, the EEOC is without power to issue substantive rules. In determining whether the Guidance constituted a substantive rule, the Fifth Circuit considered established law which provides that “[t]he primary distinction between a substantive rule and a general statement of policy” depends “on whether an agency intends to bind itself to a particular legal position.”

The Fifth Circuit found that the Guidance did in fact bind the EEOC and thus was a substantive rule. Accordingly, the Fifth Circuit determined that the “EEOC … overstepped its statutory authority in issuing the Guidance.” As a result, the Fifth Circuit upheld the lower court’s injunction and clarified that the EEOC “may not treat the Guidance as binding in any respect.”

Takeaway

This decision is a positive one for employers. However, employers should keep in mind that the court here only found fault with the manner in which the EEOC issued the Guidance. Moreover, in this case, the actions of the state agencies were consistent with Texas state laws and regulations. The court did not condemn the underlying legal principles found in the Guidance. Accordingly, private employers would be wise not to read too much into this decision. Private employers should also familiarize themselves with the Guidance, if not already familiar with it, and examine their own hiring policies to see if they run afoul of the Guidance. Employers should consult with experienced counsel where serious questions arise.

R. Eddie Wayland is a partner with the law firm of King & Ballow.  You may reach Mr. Wayland at (615) 726-5430 or at rew@kingballow.com.  The foregoing materials, discussion and comments have been abridged from laws, court decisions, and administrative rulings and should not be construed as legal advice on specific situations or subjects.