In 2012, the Equal Employment Opportunity Commission issued enforcement guidance on employers’ use of criminal background checks in the hiring process. The EEOC concluded that indiscriminate use of such checks has a disparate impact against minority applicants due to their statistically higher rates of conviction. The agency said that employers could not impose a blanket ban on hiring felons and instead must engage in an individual analysis of the connection between the crime and the job.

The State of Texas sued the EEOC, claiming that the guidance would affect rules that prohibit the hiring of felons for certain classes of state jobs. The suit has been in various stages of litigation for years, but last week, the Fifth Circuit Court of Appeals upheld an injunction preventing the EEOC from seeking to enforce the guidance against Texas’ hiring practices. While based on procedural grounds, this decision could limit the EEOC’s ability to use the enforcement guidance as the basis for disparate impact discrimination lawsuits against employers.

The Fifth Circuit concluded that the guidance was actually a substantive regulation. Under the federal Administrative Procedure Act, the EEOC must follow the rulemaking process, including providing an opportunity for public notice and comment. While the injunction only applies to claims against Texas, the decision could be used by employers in the Fifth Circuit and beyond to defend challenges to blanket rules against hiring convicted felons.

In practice, the EEOC has not actively used the enforcement guidance to pursue claims against employers. However, the issuance of the guidance has caused many employers to modify the way they use criminal background checks in the hiring process. This decision could spur some employers to revert to general exclusions of felons as opposed to a more individualized decision-making process.