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The U.S. Supreme Court is considering a case that could have important implications to disparate impact analysis, including on criminal background checks.  The case also foreshadows further challenges from the Texas Attorney General to aggressive positions taken by federal enforcement agencies in regard to disparate impact.  The case is Texas Department of Housing & Community Affairs, et al., v. The Inclusive Communities Project, Inc., Case No. 13-1371, and is being argued by the Texas Attorney General.

The Texas Attorney General seems to be focusing on Justice Scalia for support.  In 2009, Justice Scalia wrote a concurring opinion in Ricci v. DiStefano, 557 U.S. 557, 594 (2009), in which he appeared to invite challenges to Title VII’s disparate impact standard that, he wrote, “place(s) a racial thumb on the scale often requiring employers to evaluate the racial outcomes of their policies, and to make decisions based on (because of) those racial outcomes.”  His opinion notes that the Court was postponing evaluation of that issue on constitutional grounds but that it must one day be confronted.

The Texas attorney general is responding to Justice Scalia’s invitation in the Inclusive Communities Project.  The case involved a finding that there was a disparity between the number of low-income housing units approved in minority neighborhoods versus those in non-minority neighborhoods and HUD’s rule, not in the statute, that requires the employer to defend with “substantial, legitimate, nondiscriminatory interests.”  The case both challenges this non-statutory expansion as exceeding the administrative authority of HUD and argues that the root disparate impact case, Griggs v. Duke Power, 401 U.S. 424 (1971), “was not a textually sound interpretation of Title VII”  and should not be extended to other statutes.

For example, the Texas brief cites various Scalia opinions (most often concurring opinions) no fewer than 13 times and appears to invite broader consideration of the constitutionality of  the disparate impact approach altogether. 

The case, however, involves a statutory construction of the FHA, which does not include a clause prohibiting practices that have an “adverse effect” on protected groups “because of race” as in Title VII or the similar provisions of the ADEA.  Given the focus of the briefs on the fact that the FHA does not include that language, the case may well be decided solely on statutory interpretation grounds or based on limitation of the authority of HUD to adopt a disparate impact standard for cases brought under that statute that has no such “effects” language.

Employers should watch this case for the possibility that it foreshadows a further challenge to some of the more aggressive positions taken by federal enforcement agencies.  An example cited in the brief is the EEOC position in its 2012 guidance on the racially disparate impact of criminal and credit background checks that purports to preempt state laws and the common law of negligence in directing its district offices to challenge exclusions for criminal conduct under the Griggs disparate impact standard.  Those offices are complying with that direction in various courts across the country, putting legitimate risk-management decisions at peril. 

The Texas housing case was submitted on January 21st and will be decided this term.