Texas two-step: 5th Circuit says no to background check suit

The legal showdown between the state of Texas and the EEOC over the commission’s background check guidance took another turn in September when the 5th 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 Texas can proceed with its lawsuit against the EEOC.

Background on background checks

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.”

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’s or employee’s criminal conviction record, and conduct an individualized assessment before taking an adverse action.

In November 2013, Texas was the first state to challenge the guidance in a lawsuit seeking to enjoin EEOC 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 in August 2014. It found that Texas lacked standing to maintain its suit.

Texas appealed to the 5th Circuit, which reversed and remanded the case in June 2016—thus allowing Texas to go forward with its challenge of the EEOC guidance. In reaching that decision, the 5th 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.

Supreme Court’s ruling

On May 31, 2016, the Supreme Court issued a decision in United States Army Corps of Engineers v. Hawkes, 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.”

5th Circuit’s order

Given the Supreme Court’s guidance in Hawkes (and the Court’s treatment of other lawsuits brought under the APA since then), the 5th Circuit issued a new order on Sept. 23, 2016, that:

1. Withdrew its June 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 5th Circuit’s June 2016 decision)

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 whether Texas can properly challenge the guidance under the APA.

What it means for employers

Although the state’s challenge to the EEOC 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 it. Therefore, employers should continue to follow it.

Gustavo Suarez is of counsel in Ogletree Deakins’ Greenville, S.C. office, and a member of the firm’s Background Checks Advice Team. Gus assists employers with a broad range of employment law issues, including counseling on federal and state background check law.

EEOC’s 2012 guidance: Take care when asking applicants about convictions

EEOC Enforcement Guidance issued in 2012 makes clear that the commission recommends against asking applications about criminal convictions on job applications.

The takeaway: If job applications—or hiring managers—ask about applicants’ criminal conviction histories, employers better be able to prove they have a good business reason for seeking the information.

The guidance also makes clear that the EEOC never considers it appropriate to ask applicants if they have ever been arrested. It says knowing about arrest records is not “consistent with business necessity.”