State v. Equal Emp't Opportunity Comm'n

933 F.3d 433

State of TEXAS, Plaintiff–Appellee Cross–Appellant,

v.EQUAL EMPLOYMENT OPPORTUNITY COMMISSION; Janet Dhillon, in her official capacity as Acting Chair of the EEOC; William P. Barr, U.S. Attorney General, in his official capacity as Attorney General for the United States, Defendants–Appellants Cross–Appellees.

No. 18-10638

United States Court of Appeals, Fifth Circuit.

FILED August 6, 2019

Jason R. LaFond, Office of the Attorney General for the State of Texas, Austin, TX, for Plaintiff-Appellee Cross-Appellant.

Stephanie Robin Marcus, U.S. Department of Justice, Civil Division, Appellate Section, Washington, DC, for Defendants-Appellants Cross-Appellees Equal Employment Opportunity Commission, Janet Dhillon, and William P. Barr.

Leah Camille Aden, Esq., NAACP, Legal Defense & Educational Fund, Incorporated, New York, NY, Philip Hernandez, National Employment Law Project, Berkeley, CA, for Amici Curiae.

Before SMITH, WIENER, and ELROD, Circuit Judges.

JERRY E. SMITH, Circuit Judge:

Texas sued the Equal Employment Opportunity Commission ("EEOC") and the Attorney General ("Defendants"), challenging EEOC's guidance on employers' use of criminal records in hiring. Texas alleged that guidance constituted an unlawfully promulgated substantive rule and sought to enjoin its enforcement. The state also asked for a declaration per the Declaratory Judgment Act ("DJA") that it could lawfully exclude felons from state employment. The district court dismissed for want of jurisdiction, but a different panel of this court reversed. Texas v. EEOC (Texas I ), 827 F.3d 372 (5th Cir. 2016). That panel, however, withdrew its opinion and remanded so the district court could apply United States Army Corps of Engineers v. Hawkes Co. , ––– U.S. ––––, 136 S. Ct. 1807, 195 L.Ed.2d 77 (2016), in the first instance. Texas v. EEOC (Texas II ), 838 F.3d 511 (5th Cir. 2016) (per curiam).

On remand, considering cross-motions for summary judgment, the district court dismissed Texas's DJA claim but enjoined defendants from enforcing EEOC's guidance against Texas until EEOC complies with the notice-and-comment rulemaking requirements of the Administrative Procedure Act ("APA"), 5 U.S.C. § 553. We modify the injunction and affirm it as modified.

I.

A.

In April 2012, EEOC issued "Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII" ("the Guidance").¹ Citing data suggesting that blanket bans on hiring individuals with criminal records disproportionately impact minorities, the Guidance declares,

With respect to criminal records, there is Title VII disparate impact liability where the evidence shows that a covered employer's criminal record screening policy or practice disproportionately screens out a Title VII-protected group and the employer does not demonstrate that the policy or practice is job related for the positions in question and consistent with business necessity.

Guidance at 9. The Guidance also describes how EEOC will assess whether considering criminal records in hiring decisions has a disparate impact on protected groups. Notably, the Guidance concludes that "[n]ational data ... supports a finding that criminal record exclusions have a disparate impact based on race and national origin [and] provides a basis for the Commission to further investigate such Title VII disparate impact charges." Id. at 10.

The Guidance details how an employer may show that its policy is job-related and consistent with business necessity and thus may defend against a charge that its criminal-record policy gives rise to disparate impact liability under Title VII. The Guidance provides that "[a]n employer's evidence of a racially balanced workforce will not be enough to disprove disparate impact." Id. Instead, an employer "needs to show that [its criminal-record hiring] policy operates to effectively link specific criminal conduct, and its dangers, with the risks inherent in the duties of a particular position." Id. at 14.

The Guidance presents "[t]wo circumstances in which [EEOC] believes employers will consistently meet the ‘job related and consistent with business necessity’ defense": (1) by establishing a validated, multi-factor screening system per the Uniform Guidelines on Employee Selection Procedures standards or (2) by "develop[ing] a targeted screen ... and then provid[ing] an opportunity for an individualized assessment for people excluded by the screen." Id. (emphasis added). Significantly, the Guidance condemns any "policy or practice requiring an automatic, across-the-board exclusion from all employment opportunities" because it "does not focus on the dangers of particular crimes and the risks in particular positions." Id. at 16.²

"All entities covered by Title VII are subject to [the Guidance's] analysis," id. at 27 n.2—including "state[ ] and local governments," id. at 3. The Guidance was "issued as a part of the Commission's efforts to eliminate unlawful discrimination in employment screening, for hiring or retention, by entities covered by Title VII, including private employers as well as federal, state , and local governments." Id. (emphasis added).³ And the Guidance stresses that it should be followed by "employers considering the use of criminal records in their selection and retention processes"; "individuals who suspect that they have been denied jobs or promotions, or have been discharged because of their criminal records"; and "EEOC staff who are investigating discrimination charges involving the use of criminal records in employment decisions." Id.⁴

Although the scope of the Guidance is purportedly broad, EEOC has limited rulemaking and enforcement power with respect to Title VII. It may issue only "procedural regulations" implementing Title VII and may not promulgate substantive rules. See 42 U.S.C. § 2000e-12(a) ; see also EEOC v. Arabian Am. Oil Co. , 499 U.S. 244, 257, 111 S.Ct. 1227, 113 L.Ed.2d 274 (1991). And despite that EEOC can bring civil enforcement proceedings against private employers for violating Title VII, it may only investigate state employers.⁵ The Attorney General is the only federal government entity or person who may directly sue state employers to enforce Title VII. Both EEOC and the Attorney General, however, may issue aggrieved individuals "right-to-sue" letters, allowing those persons to sue a state employer for violating Title VII. See 42 U.S.C. §§ 2000e-5(f), 2000e-6.

B.

By state law and the policies of individual state agencies, Texas has long excluded persons with felony convictions—or at least those convicted of specified categories of felonies—from many public jobs. The Texas Department of Public Safety and the Texas Department of Aging and Disability Services, for instance, categorically exclude all convicted felons from employment. Texas schools and the Texas Juvenile Justice Department, moreover, categorically exclude applicants convicted of specified felonies.

Soon after EEOC issued the Guidance, Texas received notice that an individual who had been rejected for a Department of Public Safety job had filed a complaint with EEOC, challenging Texas's no-felon hiring policy as having a disparate impact in violation of Title VII. Texas, in turn, sued EEOC and the Attorney General, contending that "EEOC's rule purports to limit the prerogative of employers, including Texas, to exclude convicted felons from employment." Texas averred that it had to choose either to "violate state and local laws that prohibit the ‘individualized assessments’ that EEOC requires and consider convicted felons for hire as Troopers, jailers, and school teachers—or [to] ... ignore the EEOC's rule and risk an enforcement action."

Texas brought one claim under the DJA, 28 U.S.C. §§ 2201 – 2202 ("Count One"), and another under the APA, 5 U.S.C. § 702 ("Count Two"). In Count One, Texas asked for "a declaration 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 asked for an injunction that EEOC and the Attorney General "cannot enforce the interpretation of Title VII that appears in its Felon-Hiring Rule, nor ... issue right-to-sue letters pursuant to that rule." In Count Two, Texas urged the court to set aside the Guidance, contending that the Guidance exceeded EEOC's power under Title VII, was promulgated without notice and comment in violation of the APA, and was substantively unreasonable.

The district court dismissed for want of subject matter jurisdiction, but a divided panel reversed. Texas I , 827 F.3d 372. The panel majority held that Texas had Article III standing to challenge the Guidance, id. at 380, and that the Guidance was a final agency action eligible for judicial review under the APA, id. at 387–88. Judge Higginbotham dissented, contending that the controversy did not satisfy "Article III's demand of ripeness, injury, and adversarial engagement." Id . at 388. Judge Higginbotham also maintained that the Guidance was not a final agency action. Id .

The panel withdrew its opinion, vacated the judgment, and remanded. Though the Supreme Court had announced Hawkes before the panel issued Texas I —and the panel applied Hawkes in Texas I —the district court had not had a chance to apply Hawkes in the first instance. Texas II , 838 F.3d 511. Noting that this court had remanded another case "relat[ing] closely to the issue that the Supreme Court decided in Hawkes ," the panel did the same. Id.⁶

On remand, the district court denied Defendants' renewed motion to dismiss for lack of jurisdiction, largely adopting the reasoning in Texas I . Following cross-motions for summary judgment, the court dismissed Texas's DJA claim, "declin[ing] to declare that Texas has a right to maintain and enforce its laws and policies that absolutely bar convicted felons (or certain categories of convicted felons) from serving in any job the State and its Legislature...