Certainly, the trend in employment law has been toward greater equality for lesbian, gay, bisexual and transgender (LGBT) employees. Same-sex marriage is now the law of the land due to the Supreme Court’s ruling last summer in Obergefell v. Hodges, effectively extending employee benefits to same-sex partners of employees. At least 16 states now ban discrimination based on both sexual orientation and gender identity. The Employment Non-Discrimination Act (ENDA), which would add sexual orientation to Title VII’s list of protected classes, passed the Senate in 2013 with bipartisan support before stalling in the House of Representatives. The EEOC takes the position that existing federal law prohibits discrimination in employment based on sexual orientation and gender identity.

However, lurking in the waters is a potentially significant iceberg. In pursuing a claim that a funeral home violated Title VII by terminating a transgendered funeral director who wanted to dress in women’s clothing at work, the EEOC ran up against the Religious Freedom Restoration Act (RFRA), which bars enforcement of federal laws that “substantially burden a person’s exercise of religion.” In ruling on competing motions for summary judgment in EEOC v. R.G. & G.R. Harris Funeral Homes, Inc., a Michigan district court judge agreed that the EEOC stated a valid sex-stereotyping claim under the Supreme Court’s Price Waterhouse decision but that the RFRA exempted the funeral home from Title VII.

Background of the Harris Case

Federal anti-discrimination law has long recognized limited exemptions for religious institutions. But the funeral home in Harris is not a religious institution. It is a secular, for-profit business, albeit one with an expressly religious purpose. Its owner is a devout Christian and the funeral home’s mission statement, published on its website, states that “its highest priority is to honor God in all that we do as a company and individuals.” The website also quotes a Scripture verse, Matthew 5:33:
“But seek first his kingdom and righteousness, and all these things shall be yours as well.” The funeral home distributes Christian devotional booklets and small cards with Bible verses on them called “Jesus cards.”

The funeral home adopted dress codes for men and women based on biological sex, not gender identity. The owner testified that it was consistent with his religious beliefs that “a person’s sex is an immutable God-given gift and that people should not deny or attempt to change their sex.” The dress code for males required a conservative, dark business suit, a white or white-on-white dress shirt and plain black or dark blue socks; for women “a suit or a plain conservative dress would be appropriate.”

The conflict started when a male funeral director, Anthony Stephens, provided the funeral home with a letter stating that he had a gender identity disorder and had been diagnosed as transsexual. He stated that he intended to have sex-reassignment surgery and that, as a first step, he would live and work full-time as a woman for one year. He proposed to comply with the female dress code by wearing a skirt-suit to work, as most female employees did.

This did not sit well with the funeral home’s owner, who testified that he terminated Stephens not due to his gender identity or any activities outside of work, but due to his refusal to “dress as a man” at work. The EEOC took up Stephens’ claim in part as a test case for its theory that existing federal law bans employment discrimination based upon gender identity.

The Court Applies the RFRA to Defeat the EEOC’s Sex-Stereotyping Claim

The district court rejected the EEOC’s position that Title VII, as it stands, prohibits discrimination based upon gender identity. However, it agreed that the EEOC had a “solid argument” under the Supreme Court’s decision in Hopkins v. Price Waterhouse that in terminating Stephens “because of [his] failure to conform to sex stereotypes,” the funeral home violated Title VII. Then, relying on the 2014 Supreme Court decision in Burwell v. Hobby Lobby Stores, Inc., the district court held that the RFRA applied to the funeral home and that the EEOC had not shown that enforcing Title VII was the least restrictive means of furthering a compelling government interest. Consequently, the court found that the RFRA barred the action and granted summary judgment for the funeral home.

In the Hobby Lobby decision, the Supreme Court had ruled that the RFRA applied to private businesses and that it exempted a nationwide craft retailer from complying with the contraceptive mandate of the Affordable Care Act (ACA). However, Harris appears to be the first reported decision applying the RFRA to Title VII or other anti-discrimination statutes in the context of a private employer. But this result is perhaps predictable, as Justice Ginsburg presaged it in her dissent in Hobby Lobby, citing cases from the 1960s where employers used religious beliefs to justify racial discrimination in hiring. Although the majority opinion in Hobby Lobby dismissed this concern, the Harris court held that the Supreme Court’s logic applied equally to Title VII as it did to the ACA.

Implications for Employers

The scope of an RFRA defense is far from clear. But Hobby Lobby and Harris suggest that the defense is not limited to religious organizations, is not limited to small employers and is not limited to laws directly impacting religion. Although an RFRA defense may be best suited to claims for sexual orientation or gender identity, there is no reason to believe that it is limited to such claims either. The Harris decision does point out an important limitation of the RFRA — thus far, it has not been applied to lawsuits between private parties but only to government enforcement actions. However, as the RFRA by its terms “applies to all Federal law, and the implementation of that law,” expansion to private lawsuits is certainly possible in the future.

It seems likely that the Harris case ultimately will be resolved by a higher court. As the law is being clarified, employers who can plausibly claim a burden on their free exercise of religion should consider whether the RFRA, or state law equivalents of the RFRA, might exempt them from compliance with anti-discrimination laws.