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Decision in American Insurance Association v. HUD: Fair Housing Act Does Not Support Disparate Impact Claims
HUD suffered a blow today when Judge Richard Leon of the District of D.C. ruled that the Fair Housing Act (FHA) only permits claims of discrimination based on disparate treatment. Therefore, HUD exceeded its rulemaking authority when it promulgated a rule, “Implementation of the Fair Housing Act’s Discriminatory Effects Standard,” in February 2013 providing for claims of discrimination based on disparate impact. Judge Leon granted the plaintiffs’ motion for summary judgment and vacated the rule.
Until February 2013, HUD had never promulgated a rule that purported to enshrine disparate impact as a cognizable claim under the FHA and instead relied on precedent. As Judge Leon notes in his opinion, HUD received a scare in 2011 when the Supreme Court granted certiorari in Magner v. Gallagher, which argued that disparate impact claims were not cognizable under the FHA. Although the Court has been prevented from ruling on the question by last-minute settlements in both Magner and Mt. Holly v. Mt. Holly Citizens in Action, one day a FHA case would likely be decided (in fact, the court has a third chance to rule on this issue this very term in Texas Dept. of Housing v. Inclusive Communities Project). And so, hoping that Chevron deference would accomplish what the text of the FHA likely could not, HUD promulgated a rule enshrining disparate impact causes of action under the FHA.
Judge Leon writes, “I must, in the final analysis, determine whether the text of the FHA unambiguously evidences Congress’s intent for [disparate impact] claims to be cognizable under the Act.” (Mem. Op. at 16) He determined that the text of the FHA did not support such an interpretation, and that “only disparate treatment (intentional discrimination) claims are cognizable under the FHA.” (Mem. Op. at 16) The text of the FHA only prohibits disparate treatment, and there is no clear language prohibiting practices that result in “discriminatory effects” or “disparate impact.” For instance Smith v. City of Jackson, Justice Stevens wrote that “the text [of the Age Discrimination in Employment Act] focuses on the effects of the action on the employee rather than the motivation for the action of the employer.” Smith v. City of Jackson, 544 U.S. 228, 236. In contrast, Judge Leon writes, the text of the FHA focuses only on discriminatory actions, not discriminatory effects.
Judge Leon also notes that it is clear Congress did not intend for the FHA to encompass disparate impact claims because it did not amend the statute to do so. (Mem. Op. at 22-26) Congress amended or enacted three major civil rights laws in the late 80s and early 90s. It amended the FHA in 1988, enacted the Americans with Disabilities Act in 1990, and amended Title VII in 1991. Congress provided for disparate impact causes of action in the ADA and the 1991 amendments to Title VII. It made no such change to the FHA. If Congress wants to include disparate impact provisions in a statute, it knows how to do so. It did not do so here, which strongly suggests that it did not want the FHA to include claims based on disparate-impact liability.
The fact that the rule extended disparate impact liability to homeowners insurance also brings the rule into conflict with the McCarran-Ferguson Act. (Mem. Op. at 25-29) The McCarran-Ferguson Act is intended “to ensure the primacy of state law in regard to insurance regulation.” (Mem. Op. at 26) By requiring insurers to collect demographic data on customers, the disparate-impact rule conflicts with a number of state statutes. Judge Leon writes that it is impossible to believe that Congress intended the FHA to trump state insurance regulations. “To the contrary, it is utterly incomprehensible that Congress would intentionally provide for disparate-impact liability against insurers in the FHA, where doing so would require those same insurers to collect and evaluate race-based data, thereby engaging in conduct expressly prohibited by state law.” (Mem. Op. at 29)
How did Chevron deference come into this decision? The portion of the opinion dedicated to Chevron was much shorter than might have been expected because Judge Leon determined, for the reasons detailed above, that the rule failed the first step of the Chevron test. There is no ambiguity as to whether Congress intended the FHA to include disparate-impact liability. It unambiguously intended the FHA to prohibit only disparate treatment. Therefore, there was no need for him to consider whether HUD’s interpretation of the statute was reasonable – he had already determined that HUD’s interpretation was flatly wrong. The disparate impact rule exceeds HUD’s authority and therefore violates the APA. (Mem. Op. at 16-17)
The full text of the opinion is available here: https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2013cv0966-45
House Hearing on EEOC Background Check Policy
This morning, the House Subcommittee on Workforce Protections held a hearing on the EEOC’s regulatory and enforcement priorities that focused on the EEOC’s new criminal background check policy. As regular readers of this site know, in December 2012 the U.S. Commission on Civil Rights held a briefing on the EEOC’s criminal background check guidance. At the USCCR hearing, representatives of a wide array of businesses expressed their opposition to the guidance, and representatives of the EEOC and ex-offender advocacy groups expressed their support for the guidance. As evidenced by today’s hearing, despite the passage of time, many businesspeople, victim advocates, and members of Congress continue to oppose this guidance.
In his testimony, the National Small Business Association’s (NSBA) Todd McCracken described the quandry faced by small businesses, who find themselves “caught between competing government priorities and perspectives among different federal agencies, the courts, and the state and federal governments.” Many states prioritize the safety of consumers and categorically bar people with certain criminal records from working in certain fields. The EEOC’s guidance says that an employer can only comply with such a state requirement if the requirement complies with the guidance’s requirements. The guidance provides no safe harbor for employers who refuse to hire an employee because they are complying with a state law or regulation. Similarly, states are likely to be unimpressed if an employer violates state law by hiring a person with a criminal record for a particular position while trying to comply with the EEOC guidance. And of course, hiring a person knowing they have a criminal record (or hiring a person and not conducting a background check) leaves an employer exposed to a negligent hiring lawsuit if the employee commits a crime.
During questioning, Mr. McCracken also noted that applying the guidance poses particular difficulties for small businesses. Small businesses are less likely to have a separate HR department in-house counsel that can learn the ins and outs of the individualized assessment process. Additionally, determining the job-relatedness of a particular conviction is difficult in a small business setting, because jobs are more flexible and duties can change quickly. A conviction for assault might not be particularly relevant if an employee is just stacking bales of hay, but it might be relevant if the employer needs him to start manning the cash register in the afternoon. Determining the job-relatedness of the crime for every single duty an employee might be asked to perform is a heavy burden for small employers.
Camille Olson, representing the U.S. Chamber of Commerce, highlighted the EEOC’s inconsistent attitude toward its guidances based on what is the most advantageous position in a particular situation:
[T]he EEOC continues to send mixed signals regarding the efficacy of its guidance positions. For example, in the State of Texas v. EEOC litigation, the EEOC describes its guidance documents as “lack[ing] the force of law.” Yet, only months later, the Solicitor General of the United States asked that the Supreme Court not to grant a writ of certiorari in Young v. United Parcel Service because the EEOC is about to issue enforcement guidance on the issue. Note the inherent inconsistency in those positions. Employers are forced to comply with policy positions set for in enforcement guidance documents, while the EEOC argues in court that those positions have no force of law, while at the same time the Department of Justice requests that the Supreme Court deny granting a writ of certiorari in Young because the EEOC’s anticipated guidance will resolve the issue.
The EEOC is ranging far afield of its statutory mandate, particularly in regard to disparate impact. The criminal background check guidance is just one manifestation of the abuse of disparate impact to achieve policy goals (in this case, the reintegration of ex-offenders) that are outside the EEOC’s authority. This debate has been going on since the EEOC first mentioned in 2011 that it was considering new criminal background check guidance, although the guidance was not released until the day the EEOC voted on it in April 2012. Today’s hearing shows that the debate is not over.
The written statements of the hearing panelists are available here.
Mainstreaming Illegal Immigration, Gutting the Rule of Law, and Racializing Everything
Last week, Commissioner Kirsanow and I wrote a piece regarding DOJ’s novel application of disparate impact to discourages schools from requiring parents to show a driver’s license to enroll their children in school. Read the full post here.
Texas responds to EEOC motion in challenge to criminal background check guidance
Kathryn Palamountain and Gerald Maatman comment on the brief at Risk Management Monitor. They note that it is a “must read for employers” and further comment, “In defending against Texas’ case, the EEOC may have compromised future efforts to enforce its ‘guidance’ against employers in Texas and other jurisdictions. To the extent the EEOC attempts to rely upon its 2012 statements as the basis for prosecuting disparate impact cases focused on criminal background check practices, particularly in cases where the EEOC alleges that an employer willfully violated Title VII, employers need only turn to the EEOC’s representations to the U.S. District Court for fodder in their own defense.”
Kirsanow and Heriot on disparate impact
Commissioners Kirsanow and Heriot discussed the spread and constitutionality of disparate impact at the Federalist Society’s Executive Branch Review conference. Adam Liptak of the New York Times moderated, and Ted Shaw, a professor at Columbia Law School and a longtime leader of the NAACP’s Legal Defense Fund, also appeared on the panel.
Watch the whole thing here.
Letter to Secretary Duncan and Attorney General Holder Regarding School Discipline Guidance
Download PDF: Letter Regarding School Discipline Guidance
In February 2014, Commissioners Heriot and Kirsanow sent Secretary of Education Arne Duncan and Attorney General Eric Holder a letter expressing opposition to disparate impact provisions contained in a “Dear Colleague” letter and accompanying Guidance. The letter expressed the probability that Title VI does not include a disparate impact component, as was stated in Alexander v. Sandoval. The letter also warned that even if the legal issues surrounding the Guidance could be resolved, it would still be unwise policy.
Assessing the Impact of Criminal Background Checks and the EEOC’s Conviction Records Policy
Download the PDF: Report on EEOC Criminal Background Check Policy
In April 2012, the Equal Employment Opportunity Commission (EEOC) adopted a new guidance regarding the use of criminal background checks in hiring. The EEOC argues that the practice of using of criminal background checks in hiring can violate Title VII because it has a disparate impact on black and Hispanic men, who are more likely to have criminal records. The new guidance arguably discouraged employers from using criminal background checks when making hiring decisions, and was accompanied by statements from EEOC officials warning against the use of criminal background checks in hiring. However, the EEOC claimed that the guidance did not represent a significant departure from the previous guidance. Therefore, in December 2012, the Commission held a briefing to receive testimony about the purpose of the guidance, the effect of the guidance on employers, and the effect of the guidance on the purported beneficiaries.
Comment to HUD Regarding “Affirmatively Furthering Fair Housing” Proposed Rule
Download PDF: HUD Comment Affirmatively Furthering Fair Housing
Commissioners Kirsanow, Gaziano, and Thernstrom submitted a comment to HUD opposing a proposed rule entitled, “Affirmatively Furthering Fair Housing.” The proposed rule relied on disparate impact theory to claim that racial and ethnic geographic clustering due to housing costs constituted segregation. The rule contemplated providing program participants with data about the racial and ethnic makeup of geographic areas. The participating programs would then use this information to encourage people to live in certain areas based on their race and ethnicity.
School Discipline and Disparate Impact
Download the PDF: School Discipline and Disparate Impact
The Department of Education engaged in a Fall 2010 Disparate Impact Initiative, which examined whether there were racial disparities in school discipline. In response, the Commission held a briefing in February 2011 to examine how schools were responding to the initiative. Witnesses discussed the roots of disruptive behavior, discipline strategies, problems with a disparate impact approach to discipline, and whether it is advisable to use disparate impact to enforce Title VI in the wake of Alexander v. Sandoval. The witnesses included teachers, school administrators, and representatives of the Department of Education.