The Fifth Circuit Pushes Pre-Enforcement Review Too Far in Barring the EEOC from Publishing Guidance on Title VII’s Regulation of Ex-Convict Employment Bars

Posted in: Government

As a general matter, beneficiaries of agency action and regulated interests alike ordinarily welcome an agency’s guidance on how it interprets statutes it administers and as to what sorts of situations might result in enforcement actions. Agency guidance has run into considerable interference, however, in some legal and judicial quarters because, it is believed, the guidance as a practical matter has a coercive impact on regulated interests, enabling the agency effectively to compel compliance without undergoing the notice-and-comment procedures for rulemaking under the Administrative Procedure Act (APA) or suing in court. Even though regulated interests would generally be worse off without the guidance, having to guess what the agency would do, the ability to go to court soon after the publication of the guidance to block its publication, and even its adherence internally within the agency do serve those interests in delaying agency action altogether. Justice Fortas called this “a special hunting license…, a license for mischief because it authorizes aggression which is richly rewarded by delay in the subjection of private interests to programs which Congress believes to be required in the public interest.”

Fortas was dissenting from a pair of 1967 Supreme Court decisions—Abbott Laboratories v. Gardner and Gardner v. Toilet Goods Assn, Inc.—holding that regulatory interests could bring suits to enjoin enforcement of agency regulations under the APA even before there was an attempt to enforce them. The APA, under these decisions, creates a powerful presumption of reviewability. Unless Congress makes clear its intention to preclude judicial review, specific review provisions in the statute do not overcome the presumption, and APA review may be had of “final agency action for which there is no other adequate remedy in a court.” 5 U.S.C. § 704.

In the context of Abbott Laboratories and its companion case, the Court’s ruling made some sense. The statute in question, the Food, Drug, and Cosmetic Act, did not make clear that judicial review was limited to its special review provisions. Indeed, the Court observed the legislative history of the Act “shows rather conclusively that the specific review provisions were to give an additional remedy and not to cut down more traditional channels.” This understanding was confirmed by an express “savings” clause. Moreover, the agency action—in the Court’s words, “a self-operative industry-wide regulation” requiring particular labeling of prescription drugs—had been promulgated after notice-and-comment procedures and was “immediately felt” by the drug manufacturers. Their only choice was to comply, including undertaking a costly relabeling, or await litigation and possible disruption of their business in the marketplace and criminal penalties for selling misbranded drugs.

Later decisions make clear that the APA’s presumptive availability of pre-enforcement review extends to agency action where the agency is not regulating as such but providing benefits (witness the suits enjoining President Obama’s DACA deferral of enforcement action and employment authorization in favor of certain undocumented immigrants). The presumption also has been extended to agency interpretations in government licensing contexts where the interpretation, if not complied with, is likely to result in a denial of the sought-for license or a cloud hampering the plaintiff’s title or desired use of its property.

Perhaps the furthest extension to date is the Fifth Circuit’s August 6, 2019, decision in State of Texas v. Equal Employment Opportunity Commission, No. 18-10638, where the panel ruled that the EEOC’s guidance on the applicability of disparate impact analysis to employers’ use of criminal records in hiring decisions (EEOC, 915.002, Consideration of Arrest and Conviction Records in Employment Decisions under Title VII of the Civil Rights Act of 1964 (2012) (Guidance)) violated the APA because it was issued without following the notice-and-comment procedures for rulemaking under section 553 of the APA. The court sustained an injunction barring the EEOC and the Department of Justice (which has a role in enforcing Title VII with respect to public employers) from treating the Guidance as binding until notice-and-comment procedures are followed.

The State of Texas ruling is hard to understand on a number of grounds. First, the EEOC actually lacks both substantive rulemaking and internal adjudicatory authority under Title VII, and nor does it enjoy the self-enforcing in terrorem leverage of a licensing agency. All the EEOC can do is bring a lawsuit on its own against a private employer (a result of 1972 amendments), receive charges from private-sector and government workers, investigate those charges, and if finds cause to believe discrimination has occurred and conciliation efforts are unavailing, issue a right-to-sue letter, which then allows the charging party to bring a court action. In essence, the court of appeals in State of Texas found the EEOC Guidance a “substantive rule” having the force of law, when the agency has no authority to promulgate such a rule. How can there be a feared circumvention of section 553 of the APA when no rulemaking is possible? How can its interpretive guidance be said to have “the force of law”?

Second, there is no discussion at all of whether Title VII precludes review outside of is specified review provisions. Title VII contains no relevant savings clause or other evidence of an intention to allow means of enforcing the statute other than its specified review provisions. The court of appeals in State of Texas is simply ignoring the threshold inquiry that was Part I of the Abbott Laboratories decision—does the statute in question preclude pre-enforcement review?

Third, as for the APA’s requirement that, even in the absence of such preclusion, review can be had only of “final agency action for which there is no other adequate remedy,” the Fifth Circuit panel determined, quoting Bennett v. Spear, that the Guidance “mark[ed] the ‘consummation’ of the agency’s decisionmaking process” and was an agency action “by which ‘rights or obligations have been determined,’ or from which ‘legal consequence will flow.’” It may well that the Guidance reflected the agency’s final views at the time of its publication, although likely not after the 2016 change in administration. It is unclear how “final” an interpretation can be when it has not coalesced in an enforcement action or binding document of some sort. Even if the EEOC brought suit on its own, it would not be one to enforce the Guidance as such but, rather, to enforce substantive obligations under Title VII, and would have to be defended in those terms. (It has been suggested that one way to avoid a “final agency action” determination is to use qualifying words or speak in the subjunctive voice—propelling us into a new Monty Python department of Silly Works).

As for the “legal consequences” prong of Bennett, the appeals court relied on a dubious set of indicators—that the Guidance “binds EEOC staff to an analytical method in conducting Title VII investigations and directs their decisions about which employers to refer for enforcement actions,” and also limits the staff’s discretion as to what evidence will establish a defense to liability. The EEOC’s use of disparate impact analysis was longstanding, and the possibility it would be used to address ex-convict disabilities was evidenced by court decisions dating back to the 1970s. In any event, in the context of an agency that lacks rulemaking authority or the self-enforcing might entailed in the prospect of a license denial, the Fifth Circuit’s analysis either denudes the “legal consequences” prong of any content or suggests that all agency guidance would now be open season for pre-enforcement judicial review.

Finally, the court offered no discussion at all of the “for which there is no other adequate remedy in a court” requirement in section 704 of the APA. It cannot be sufficient to obtain APA review that employers face the dilemma of having to decide whether to ignore the EEOC analysis altogether or adjust their hiring procedures to avoid possible liability if a suit is brought by the EEOC or a charging party down the road files suit and the employer loses on the merits. This would essentially mean that the employer has the right to run to court simply to avoid legal uncertainty.

State of Texas is an unsupportable decision. Hopefully, courts will find a way to vitiate its effect. It does illustrate a larger issue of how to formulate an appropriate framework for applying Abbott Laboratories that avoids creating a “hunting license… for mischief.”

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