Texas v. Equal Emp't Opportunity Comm'n

• Decision Date: 27 June 2016
• Docket Number: No. 14-10949,14-10949
• Parties: State of Texas, Plaintiff–Appellant v. Equal Employment Opportunity Commission; Jenny R. Yang, in her official capacity as Chair of the Equal Employment Opportunity Commission; Loretta Lynch, U.S. Attorney General, Defendants–Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

827 F.3d 372

State of Texas, Plaintiff–Appellant

v.Equal Employment Opportunity Commission; Jenny R. Yang, in her official capacity as Chair of the Equal Employment Opportunity Commission; Loretta Lynch, U.S. Attorney General, Defendants–Appellees.

No. 14-10949

United States Court of Appeals, Fifth Circuit.

Filed June 27, 2016

Prerak Shah, Senior Counsel, Scott A. Keller, Solicitor, Office of the Attorney General for the State of Texas, Austin, TX, for Plaintiff–Appellant.

Stephanie Robin Marcus, U.S. Department of Justice, Civil Division, Appellate Section, Justin Michael Sandberg, U.S. Department of Justice, Civil Division Federal Programs Branch, Washington, DC, for Defendants–Appellees.

Before JOLLY, HIGGINBOTHAM, and DAVIS, Circuit Judges.

E. GRADY JOLLY, Circuit Judge:

In this declaratory judgment action, the State of Texas appeals the district court's order dismissing this action under Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction. Texas's complaint seeks a declaration that an Enforcement Guidance document from the Equal Employment Opportunity Commission (“EEOC”) regarding the hiring of persons with criminal backgrounds violates the Administrative Procedure Act (“APA”), 5 U.S.C. §§ 701 –06. The EEOC has instigated no legal proceedings against the State of Texas regarding the subject of felony hiring bans and Title VII.

This appeal requires the court to address only the threshold issues of justiciability and subject matter jurisdiction under both Article III and the APA. In dismissing Texas's complaint, the district court held that Texas lacked Article III standing to bring this action because Texas could not show a substantial likelihood of harm, noting that although the EEOC had the statutory authority to investigate Title VII charges against Texas, it had no authority to bring an enforcement action against the State, that authority belonging only to the Attorney General of the United States. The district court further asserted that Texas's challenge to the EEOC's Enforcement Guidance was unripe, and that, in any event, the court lacked subject matter jurisdiction over the APA claim because the EEOC's Guidance did not constitute “final agency action” under 5 U.S.C. § 704.

Although the parties conflate the issues of standing, ripeness, and “final agency action” under the APA, Texas essentially argues that it has standing because it is an object of the challenged EEOC Guidance, and that the Guidance is a “final agency action” because it creates legal consequences for Texas and all other employers. Texas asserts that the Guidance implements a mandatory regulatory framework for employers and EEOC staff to follow, and that the Guidance purports to preempt Texas state law. In response, the EEOC argues that the Guidance is purely advisory, and thus does not create an actual injury sufficient to confer standing. The EEOC further contends that, because it cannot bring an enforcement action against Texas directly, the Guidance is not a “final agency action” under the APA. In making this argument regarding “final agency action,” the EEOC relies heavily on several recent decisions from this circuit. The EEOC's arguments regarding ripeness overlap with its arguments regarding a lack of finality, as the EEOC essentially contends that Texas's challenge to the Guidance is unripe until Texas faces a more certain threat of enforcement.

After full briefing and argument, we REVERSE the district court's judgment and REMAND this action for further proceedings not inconsistent with this opinion.

I.

Although this appeal presents only a jurisdictional issue, this action ultimately seeks to question whether a bar on hiring felons constitutes an unlawful employment practice under Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq. Title VII makes it unlawful for an employer:

(1) to fail or refuse to hire or discharge any individual, or otherwise to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual's race, color, religion, sex, or national origin; or

(2) to limit, segregate, or classify his employees or applicants for employment in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect his status as an employee, because of such individual's race, color, religion, sex, or national origin.

42 U.S.C. § 2000e-2(a).

Texas employs hundreds of thousands of people across various state agencies. Many of these state agencies do not hire convicted felons, felons convicted of particular categories of felonies, or, in some cases, individuals convicted of particular misdemeanors. The sources of these bans stem from both Texas state statutes and longstanding employment policies adopted by the agencies. According to Texas, its agencies apply the hiring bars neutrally “to all job applicants, without regard to their races.” Where these exclusions exist, however, Texas applies them categorically and does not undertake an individualized assessment into the nature of the prospective employee's conviction.

Although the EEOC enforces Title VII, its enforcement power is limited in a number of respects that are relevant to this appeal. First, the EEOC has only the limited regulatory authority “to issue, amend, or rescind suitable procedural regulations to carry out the provisions of this subchapter.” 42 U.S.C. § 2000e-12(a). In other words, the EEOC cannot promulgate binding substantive interpretations of Title VII. Second, the EEOC lacks the authority to file an enforcement action against a state employer directly. See 42 U.S.C. § 2000e-5(f)(1). The EEOC does, however, have the power to investigate state employers for potential Title VII violations. The EEOC refers any case for which it finds reasonable cause to believe a Title VII violation occurred to the Attorney General of the United States, who then decides whether to bring enforcement action against the state. Id .

Notwithstanding its limitation to only formulating procedural rules, the EEOC holds and advances the view, as expressed through its policy statements, that categorical bans on the hiring of felons can constitute a violation of Title VII when they disproportionately affect blacks and Hispanics. In 2012, the EEOC issued the “Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act of 1964” (the “Enforcement Guidance” or the “Guidance”), which is at issue in this suit. The Enforcement Guidance provides that

[w]ith 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.

The Guidance then sets out a framework for addressing both whether a hiring policy screens out a Title VII-protected group and whether a policy is “consistent with business necessity.” On the first prong, the Guidance lays out various criteria that the EEOC will use to determine whether a hiring policy has a disparate impact, and asserts that an employer's evidence of a racially balanced workforce “will not be enough to disprove disparate impact.” On the second prong, the Guidance addresses the “job-related, business necessity” defense by offering employers the details of a screening policy that creates a disparate impact, but nonetheless complies with Title VII because it is narrowly tailored to serve a legitimate business need.

Texas filed suit on November 4, 2013, and filed its amended complaint on March 14, 2014. The amended complaint seeks declaratory and injunctive relief, alleging that the Enforcement Guidance is, in effect, a binding substantive interpretation of Title VII and thus violates the APA. The EEOC moved to dismiss the amended complaint on three jurisdictional grounds: (1) standing; (2) ripeness; and (3) lack of subject matter jurisdiction under the APA. The district court granted the motion to dismiss. Although the district court's opinion cites all three grounds as independent bases for dismissal, the district court addressed only in passing the issues of ripeness and jurisdiction under the APA, and emphasized the lack of Article III standing. Texas filed a timely appeal.

II.

First, we consider whether Texas has Article III standing.¹ Texas can satisfy the constitutional elements of standing by “present[ing] (1) an actual or imminent injury that is concrete and particularized, (2) fairly traceable to the defendant's conduct, and (3) redressable by a judgment in [Texas's] favor.” Dua r te ex rel. Dua r te v. City of Lewisville, Tex. , 759 F.3d 514, 517 (5th Cir. 2014). A plaintiff must support each standing element “with the manner and degree of evidence required at the successive stages of the litigation.” Lujan v. Defenders of Wildlife , 504 U.S. 555, 560, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992). Thus, at the motion to dismiss stage, the court accepts as true all well-pleaded allegations concerning standing. Ass'n of Am. Physicians & Surgeons, Inc. v. Tex. Med. Bd. , 627 F.3d 547, 550 (5th Cir. 2010). The court reviews de novo a district court's determination of standing. Contender Farms, L.L.P. v. U.S. Dep't of Agric. , 779 F.3d 258, 264 (5th Cir. 2015).

Furthermore, because Texas is bringing this action in its capacity as a sovereign state being pressured to reevaluate state law or incur substantial costs, it “is entitled to special solicitude in our standing analysis.” Massachusetts , 549 U.S. at 520, 127 S.Ct. 1438.

Our discussion here begins with “a basic question that underlies all three elements of standing—‘whether the plaintiff is [itself] an object’ ” of the challenged agency “rule.” Contender Farms , ...