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Background Check Best Practices After 5th Circ. EEOC Ruling

September 10, 2019 | by Robin B. Taylor Paula Graves Ardelean


For the last seven years, employers have cautiously approached consideration of applicants’ criminal conviction records due to guidance issued by the U.S. Equal Employment Opportunity Commission in 2012. However, a recent decision of the U.S. Court of Appeals for the Fifth Circuit has called into question the EEOC’s authority to issue this guidance.

On Aug. 6 in State of Texas v. EEOC, the Fifth Circuit ruled that the EEOC “overstepped its statutory authority” in issuing the “Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII”.[1] The 2012 guidance was issued during President Barack Obama’s administration.

It provides that employers should not automatically exclude convicted felons from employment, citing data suggesting that such a practice disproportionately impacts minorities.[2] The guidance limits consideration of an applicant’s criminal conviction to circumstances which are “job-related and consistent with business necessity.”

The issue came before the Fifth Circuit because the state of Texas excludes applicants convicted of specified categories of felonies from many public jobs. When this practice was challenged by an individual rejected for a covered public job, Texas sued the EEOC and the attorney general challenging the legality of the guidance. The Fifth Circuit ultimately agreed with the state of Texas and barred the EEOC and the attorney general of the united states from enforcing the EEOC’s interpretation of the guidance against the state of Texas.

The Guidance

The enforcement guidance discourages employers from seeking information about arrests and cautions employers that a criminal conviction should not be an absolute bar to employment. The EEOC asserts that because arrest and incarceration rates are particularly high for African American and Hispanic men, an employment policy which prohibits the hiring of an applicant with a record of an arrest or conviction could have a disproportionately negative impact on the hiring of African Americans and Hispanics.

Instead, the commission encourages employers to consider the nature and gravity of the offense or conduct; the time that has passed since the offense, conduct and/or completion of the sentence; and the nature of the job held or sought. These are commonly known as the Green factors based on language in a 1975 U.S Court of Appeals for the Eighth Circuit case, Green v. Missouri Pacific Railroad.[3]

The EEOC further suggests that the employer then provide an opportunity for an individualized assessment for people excluded by the screen to determine whether the policy as applied is job-related and consistent with business necessity. Individualized assessment generally means that an employer (1) informs the applicant that he or she may be excluded because of past criminal conduct; (2) provides the applicant an opportunity to demonstrate that the exclusion does not properly apply to the applicant; and (3) considers whether the individual’s additional information shows that the policy as applied is not job-related and consistent with business necessity.

If an applicant who is rejected because he or she has been arrested or convicted of a crime sues claiming that the hiring policy has a disparate impact on African Americans, the employer will have to prove that the policy or practice is “job related for the position in question” and “consistent with business necessity.” The EEOC cautions that employers cannot escape liability by simply showing that their consideration of criminal background has no actual discriminatory impact considering their workforce as a whole. If the employer overcomes this hurdle, the applicant may still prevail if he or she can prove that a “less discriminatory alternative employment practice” would have served the employer’s goals and the employer refused to follow it.

Texas’ Challenge to the Guidance

Texas law and the policies of several state agencies provide that convicted felons must be excluded from certain public jobs, such as troopers, jailers and school teachers. An applicant denied a position with the Department of Public Safety filed a charge with the EEOC claiming that Texas’s policy had a disparate impact in violation of Title VII. In response, Texas sued the EEOC and the attorney general, arguing that the guidance, which requires individualized assessments of the circumstances related to a conviction, is contrary to Texas state law that prohibits individualized assessments.

Texas brought a claim under the Declaratory Judgment Act, requesting “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 the court to enjoin the EEOC and attorney general from enforcing the interpretation of Title VII in the guidance and from issuing right-to-sue letters pursuant to the rule. Texas also asserted a claim under the Administrative Procedure Act, arguing that the EEOC exceeded its power under Title VII by promulgating the guidance without notice and comment in violation of the APA.

The Guidance Was a Final Agency Action and Texas Had Standing to Sue

In a 27-page opinion, the Fifth Circuit conducted a thorough legal analysis of the issues presented by the state of Texas and the EEOC, as well as the authority granted to the EEOC by Congress in Title VII. First, the court decided two jurisdictional issues: “Whether the Guidance is a final agency action that we may review and whether Texas has standing to challenge the Guidance.”

The court ultimately determined that the guidance is a final agency action subject to review by the court. The court applied the U.S. Supreme Court’s two-part test set forth in Bennett v. Spear to determine the guidance was a final agency action: (1) whether the action marks the “consummation of the agency’s decision-making process,” and (2) “by which rights or obligations have been determined, or from which legal consequences flow.”[4]

The parties agreed that the guidance marked the consummation of the agency’s decision-making process, leaving the court to focus on whether the guidance constituted an action “by which rights or obligations have been determined, or from which legal consequences will flow.” The commission acknowledged that the guidance binds the EEOC as the guidance provides the analytical framework for conducting Title VII investigations and for which claims should be referred for enforcement action.

The commission challenged the second Bennett factor and argued that legal consequences do not flow from the guidance because the EEOC lacked power to bring an enforcement action against the state of Texas. The Fifth Circuit rejected this argument, finding that finality depends on the rule itself and not the party challenging it, and noting that legal consequences can flow from the rule even if “no administrative or criminal proceeding can be brought for failure to conform.”

The commission also claimed that no legal consequences would flow from the guidance unless a court presiding over an enforcement action agreed with the guidance. The Fifth Circuit disagreed, finding that legal consequences flow from the commission’s guidance because the guidance dictates how the EEOC must assess Title VII disparate-impact claims that target policies prohibiting the hiring of felons. Relying heavily on language in the guidance “committing the agency to a view of the law that, in turn, forces the plaintiff either to alter its conduct, or expose itself to potential liability,” the court found that the guidance constitutes a final agency action.

Next the court considered whether Texas had standing to sue. Texas bore the burden of proving that it suffered “an injury that is ‘concrete, particularized, and actual or imminent; fairly traceable to the challenged action; and redressable by a favorable ruling.’” The court stated that Texas suffered both an increased regulatory burden and pressure to change its state law regarding the hiring of felons and that both injuries were as a result of the guidance. Recognizing that the injuries would be redressed by a favorable ruling, the court found that Texas had standing to sue the EEOC and the attorney general.

EEOC Lacked Power to Promulgate the Guidance

Upon determining that it had jurisdiction to address the controversy, the court turned to the injunction. The district court’s injunction stated: “Defendants EEOC and the Attorney General of the United States … are enjoined from enforcing the EEOC’s interpretation of the Guidance against the State of Texas until the EEOC has complied with the notice and comment requirements under the APA for promulgating an enforceable substantive rule.”

Texas asserted that the EEOC lacked authority to promulgate a substantive rule interpreting Title VII at all. Alternatively, Texas argued that if the EEOC did have the authority to promulgate a substantive rule, it failed to comply with the notice and comment process mandated by the APA.

The court agreed that Title VII provides the EEOC with the authority to make procedural regulations, but not to promulgate substantive rules. The Fifth Circuit noted that the district court’s injunction “implies that it would permit the Guidance to stand if it went through notice-and-comment rulemaking — a process used to promulgate substantive rules.”

Because the Fifth Circuit found the EEOC lacked authority to promulgate a substantive rule at all, the court modified the injunction by striking the clause “until the EEOC has complied with the notice and comment requirements under the APA for promulgating an enforceable substantive rule.” Thus, the EEOC would not be able to cure the defect in the guidance by satisfying the notice-and-comment rulemaking process required by the APA.

Best Practices for Employers

Although the ruling is seemingly favorable for employers, caution should still be exercised when making hiring decisions based on an applicant’s felony conviction. The Fifth Circuit’s decision has limitations:

  • The court’s decision applies only to the state of Texas as an employer and not to private employers in Texas or elsewhere. However, it is reasonable to anticipate that the same analysis would apply in a case involving a private employer.
  • The Fifth Circuit is the appellate court for Mississippi, Louisiana and Texas. Its rulings are not binding on other circuits, but may be persuasive.
  • Many states have enacted legislation to “ban the box” seeking information regarding arrest or conviction records on employment applications and limiting the authority employers have to inquire about an applicant’s criminal history. This ruling has no impact on those states’ laws.

In sum, employers should exercise caution before disregarding the EEOC’s guidance and should consult legal counsel regarding the impact of the Fifth Circuit’s ruling in the states where they do business. At times, employers have a genuine interest in not hiring persons convicted of violent crimes and those involving drugs, dishonesty or theft for example.

Employers have a duty to protect the safety of their employees and assets. Accordingly, if permissible in your state and municipality, employers should consider the following:

  • Ask for conviction information on job applications if it is legal to do so in the states in which the employer is doing business, but note on the application that a conviction is not an absolute bar to employment.
  • Include on the job application language stating that falsification of an employment application is grounds for not hiring an applicant and for termination of employment.
  • Request criminal background checks from a credible source and carefully consider the parameters of the search. Some background search companies do not report convictions more than seven years old but may be willing to provide this service for a longer period of time if requested.
  • Repeat background checks periodically on a nondiscriminatory basis.
  • Implement a policy requiring all employees to report an arrest or criminal conviction of their own and of a fellow employee.
  • If information regarding an arrest or conviction is obtained, consult with legal counsel to consider the EEOC guidance and the Green factors.

There are no bright-line answers when considering arrests and convictions, but a well-thought-out, proactive plan can help to deter or defend legal challenges.

[1] State of Texas v. Equal Employment Opportunity Commission and Attorney General of the United States , No. 18-10638 (August 6, 2018).


[3] Green v. Missouri Pacific Railroad , 523 F.2d 1290, 1293 (8th Cir. 1975).

[4] Bennett v. Spear , 520 U.S. 154, 177-78 (1997).