In Texas v. EEOC, No. 18-10638 (5th Cir. Aug. 6, 2019) (Smith, Wiener, Elrod), the Fifth Circuit enjoined the EEOC and the Attorney General from enforcing a 2012 EEOC guidance document regarding employers’ use of criminal records in hiring. Two things make this case unique and interesting. First, the Court permitted Texas to challenge the Guidance even though EEOC can’t bring an enforcement action against a state under Title VII. And second, because the Guidance binds EEOC staff, the Court held that it is both “final agency action” subject to judicial review under the APA and a substantive rule that exceeds EEOC rulemaking authority under Title VII.
The Supreme Court has confronted EEOC guidance in several previous cases, and as far as I know, has never set any of that guidance aside as an ultra vires substantive rule because it was binding on agency staff. In one case, the Court listed the fact that guidance was “binding on EEOC staff” as a reason to defer to EEOC's views in the document under Skidmore. See Fed. Exp. Corp. v. Holowecki, 552 U.S. 389, 399-400 (2008). So what gives? Surely the Fifth Circuit was aware of those cases. Are they distinguishable in some obvious way that I'm overlooking? If you have any thoughts or insights, please let me know.
After reading the Fifth Circuit’s opinion, I tweeted its holding and called the case “doubly important.” Moments later, @JoshuaABlock replied: “It’s also doubly wrong.” Joshua Block is a senior staff attorney at the National ACLU’s Lesbian Gay Bisexual Transgender and HIV Projects. Having worked on lots of important and interesting administrative-law cases, Joshua knows his way around the APA. So I asked whether he might spell out his objections to the Court’s opinion in a bit more detail. Joshua was happy to oblige. His criticisms and my thoughts in response appear at the end of this post. But first, a more detailed summary is in order.
In 2012, EEOC promulgated "Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII," a guidance document stating that an employer's reliance on arrest and conviction status as the basis of an employment decision may in some instances violate Title VII. In addition to recommending a set of best practices and “safe harbors” for employers, 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.”
Many Texas agencies exclude persons convicted of certain felonies from certain public jobs. 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 responded by suing EEOC and the Attorney General, contending that the Guidance was a substantive rule that the EEOC had no authority to issue. Title VII permits EEOC to issue “procedural regulations,” but not substantive rules. 42 U.S.C. § 2000e-(12)(a).
Texas sought 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 as well as an order enjoining EEOC and the Attorney General from “enforce[ing] the interpretation of Title VII that appears in its Felon-Hiring Rule” and from “issu[ing] right-to-sue letters pursuant to that rule.” Texas also brought an APA claim urging the Court to set aside the Guidance as an unlawfully promulgated substantive rule.
After an initial trip up to the Fifth Circuit and back, the district court dismissed Texas’s declaratory-judgment claim and enjoined the EEOC and AG from enforcing EEOC’s guidance against Texas until it went through notice and comment. Both sides appealed.
The Fifth Circuit began by addressing whether the Guidance was final agency action. To be “final,” agency action must (1) be the consummation of the agency’s decision-making process and (2) it must be an action that determines rights or obligations or from which legal consequences flow. Bennett v. Spear, 520 U.S. 154 (1996). The parties agreed that the Guidance was the consummation of EEOC’s decision-making process, so the Court focused its attention on the second prong of the Bennett test.
The Court held that the Guidance was final because it binds EEOC staff. EEOC argued that didn’t matter because EEOC can’t enforce the Guidance against Texas. The Fifth Circuit rejected that argument, though, explaining that EEOC can enforce the Guidance against other regulated parties, and a rule can’t be final for some parties but not others. The Court also noted that the Guidance’s creation of two “safe harbors” from Title VII liability confirmed its status as final agency action. (citing United States Army Corps of Engineers v. Hawkes, 136 S. Ct. 1807 (2016) (holding that because a safe harbor from liability determines rights and obligations, an agency action creating such an escape hatch is final)).
After concluding that Texas had standing to challenge the Guidance, the Court proceeded to the merits. The panel agreed with Texas that the Guidance is a substantive rule that EEOC is not authorized to promulgate under Title VII. According to the Court, “[t]hat conclusion follows naturally from our holding that the Guidance is final agency action.” The Court had already explained that all substantive rules are final for APA purposes, and any rule that binds the agency is substantive. For that reason, the Court enjoined both the EEOC and the AG from “treat[ing] [it] as binding in any respect.”
Now for Joshua’s criticisms of the opinion:
1. “It treats EEOC ‘enforcement’ as though EEOC has administrative enforcement proceedings with legal consequences. EEOC. No legal consequences attach to a ‘cause’ finding. And, despite Texas’s confusion on this point, a right-to-sue letter isn’t even a cause finding.”
2. “A right to sue letter just means the plaintiff has exhausted the administrative process. It isn’t an evaluation of the merits. And even ‘cause findings’ don’t have any legal consequences at all. The only thing EEOC is allowed to do is file litigation and its internal guidelines for when to file litigation should be effectively unreviewable as prosecutorial discretion. If EEOC were allowed to bring administrative enforcement proceedings then guidance could have coercive effect. But all EEOC can do to enforce legal theories is sue.”
I’m not convinced that the Court doesn’t “understand how EEOC enforcement works.” Indeed, the opinion discusses EEOC’s inability to bring an enforcement action against Texas at some length. It simply disagrees with Joshua that EEOC’s lack of enforcement authority precludes the Guidance from qualifying as “final agency action.” According to the Court, “legal consequences [still] flow” from the Guidance because it binds EEOC staff when they conduct investigations. That means Texas must either change its policies to conform to the Guidance or else risk that EEOC will refer more cases against Texas to the AG who can bring an enforcement action against Texas.
Furthermore, as the Court pointed out, because EEOC can bring enforcement proceedings against private employers, Joshua’s view seems to lead to a final-for-me-but-not-for-thee approach to finality. That doesn’t seem right to me. I assume that Joshua intended to take issue with the Court’s finality analysis because of his emphasis on “legal consequences,” which I take to be an invocation of the second prong of the Bennett v. Spear standard. But perhaps he intended to criticize the Court’s discussion of standing (or something else). Joshua, feel free to correct me if I’ve misread your criticism. Also, if you’d like to continue the dialogue, just let me know. I’m happy to keep the conversation going.
A final point: I’m aware of very few cases that have confronted the finality issue in this context: i.e. where an agency rule is challenged by a party that can never be the subject of an enforcement action by the promulgating agency. For those interested in reading more on the topic, a good starting place might be Beau J. Baumann and Greg Mina’s Note in the Cornell Journal of Law & Public Policy entitled “Clowning Around with Final Agency Action,” which discusses a similar finality issue that arose in Parson v. U.S. Dep’t of Justice, 801 F.3d 701, 716 (6th Cir. 2015).