Seyfarth Synopsis: In one of the first two ever transgender discrimination cases brought by the EEOC, a federal court in Michigan granted the employer’s motion for summary judgment, finding the employer met its burden in demonstrating that it is exempt under the Religious Freedom Restoration Act, while the EEOC failed to suggest a less restrictive alternative in its challenge of the employer’s gender-specific dress code policy.

In one of the first two ever transgender discrimination cases brought by the EEOC, the government alleged that a funeral home wrongfully terminated its former funeral director for being transgender, for transitioning from male to female, and/or for not conforming to the employer’s gender-based preferences regarding its dress code. The funeral home argued it was exempt under the Religious Freedom Restoration Act (“RFRA”). In EEOC v. R.G. & G.R. Harris Funeral Homes, Inc., No. 14-13710 (E.D. Mich. Aug. 18, 2016), after the EEOC and employer R.G. & G.R. Harris Funeral Homes, Inc. (“the Funeral Home”) both moved for summary judgment, Judge Cox of the U.S. District Court for the Eastern District of Michigan granted the Funeral Home’s motion and denied the EEOC’s motion. The court also dismissed the EEOC’s claim that the Funeral Home engaged in an unlawful employment practice by providing work clothes only to males, noting that the EEOC had not done a full investigation of this claim that it uncovered during its wrongful termination investigation.

Although transgender discrimination litigation is not yet explicitly covered under Title VII, this ruling is monumental in terms of shaping the landscape for an evolving area of law that will profoundly impact employers in years to come.

Case Background

The Funeral Home is a closely-held, for-profit corporation operating three funeral homes in Michigan. Id. at 7. Owner and operator Thomas Rost has been a Christian for over sixty-five years. Id. at 15. While the Funeral Home does not officially affiliate with a religion, its website contains scripture and various bible verses are dispersed at its locations. Id. The Funeral Home has a strict employee dress code policy with several requirements, including that men must wear suits and women must wear jackets and skirts/dresses. Id. at 8-9.

The claimant was hired in 2007. Id. at 9. In 2013, the claimant provided the Funeral Home with a letter stating he intended to begin transitioning his gender to female following return from a vacation. Id. at 10. Although the claimant intended to abide by the gender-specific dress code by wearing a skirt during the transition, Rost fired the claimant, stating “this is not going to work out.” Id. at 11.

The claimant filed a charge of sex discrimination with the EEOC. During its investigation, the EEOC discovered that male employees at the Funeral Home were provided with work clothing and that female employees were not. The EEOC filed suit against the Funeral Home on September 25, 2014, asserting two claims. Id. at 12. First, it asserted a wrongful termination claim, alleging the claimant was fired because the claimant is transgender, because of the claimant’s transition from male to female, and/or because the claimant did not conform to the Funeral Home’s sex or gender-based preferences, expectations, or stereotypes. Second, the EEOC alleged that the Funeral Home engaged in an unlawful employment practice by providing work clothes to male but not female employees. The parties filed cross-motions for summary judgment.

The Decision

The court granted summary judgment in favor of the Funeral Home as to the wrongful termination claim, and dismissed the EEOC’s claim regarding the work clothes being provided only to males. Id. at 55-56. First, the Funeral Home asserted that its enforcement of its sex-specific dress code cannot constitute impermissible sex stereotyping under Title VII. The court rejected this argument, opining that “[t]his evolving area of the law – how to reconcile this previous line of authority regarding sex-specific dress/grooming codes with the more recent sex/gender-stereotyping theory of sex discrimination under Title VII – has not been addressed by the Sixth Circuit.” Id. at 25-26.

On the heels of the Supreme Court’s decision in Burwell v. Hobby Lobby Stores, Inc., 134 S. Ct. 2751 (2014), the Funeral Home also argued that the RFRA prohibited the EEOC from applying Title VII to force the Funeral Home to violate its sincerely held religious beliefs. Id. at 26. The RFRA prohibits the “‘Government [from] substantially burden[ing] a person’s exercise of religion even if the burden results from a rule of general applicability’ unless the Government ‘demonstrates that application of the burden to the person—(1) is in furtherance of a compelling governmental interest; and (2) is the least restrictive means of furthering that compelling governmental interest.’” Id. at 27 (quoting 42 U.S.C. §§ 2000bb–1(a), (b)). The EEOC conceded that the Funeral Home’s religious beliefs were sincerely held. Id. Accordingly, citing Rost’s testimony that permitting employees to dress inconsistent with their biological sex would violate his religion and pressure him to relinquish his business, the court found that “the Funeral Home met its initial burden of showing that enforcement of Title VII, and the body of sex-stereotyping case law that has developed under it, would impose a substantial burden on the ability of the Funeral Home to conduct business in accordance with its sincerely-held religious beliefs.” Id. at 32.

After finding that the Funeral Home demonstrated that enforcement of Title VII would be a substantial burden to its religious exercise, the EEOC then needed to meet its two-part test: (1) application of the burden is in furtherance of a compelling government interest; and (2) is the least restrictive means of furthering that compelling government interest. The court assumed without deciding that the EEOC met its first burden, therefore proceeded to analyze the least restrictive means burden. Id. at 36. Quoting Hobby Lobby, the court noted that the “least-restrictive means standard is exceptionally demanding.” 134 S. Ct. at 2780.

Rejecting the EEOC’s conclusory argument that Title VII is narrowly tailored, the court noted that the EEOC did not provide “a focused ‘to the person’ analysis of how the burden on the Funeral Home’s religious exercise is the least restrictive means of clothing gender stereotypes at the Funeral Home under the facts and circumstances presented here.” Id. at 38. Further, noting the EEOC had been proceeding as if gender identity or transgender status was protected under Title VII, the court opined that the EEOC appeared to have taken the position that the only acceptable solution would be for the Funeral Home to allow the claimant to wear a skirt while working as a funeral director. Id. at 39.

Finding that the EEOC failed to offer or even explore any solutions that could have worked under the facts of this case, the court rejected the EEOC’s approach and questioned “[i]f the EEOC truly has a compelling governmental interest in ensuring that [the claimant] is not subject to gender stereotypes in the workplace in terms of required clothing at the Funeral Home, couldn’t the EEOC propose a gender-neutral dress code (dark-colored suit, consisting of a matching business jacket and pants, but without a neck tie) as a reasonable accommodation that would be a less restrictive means of furthering that goal under the facts presented here?” Id. at 38-41. Accordingly, the court held that the EEOC did not meet its demanding burden, thus entitling the Funeral Home to RFRA exemption from Title VII.

As to the second claim, the EEOC alleged that the Funeral Home violated Title VII by providing a clothing allowance and/or work clothes to male employees but failing to provide such assistance to female employees. Id. at 45. Relying on EEOC v. Bailey, 563 F.2d 439 (6th Cir. 1977), the Funeral Home argued that the EEOC may include in a Title VII suit only claims that fall within an “investigation reasonably expected to grow out of the charge of discrimination.” Id. at 45-46. Applying Bailey, the court concluded that the EEOC investigation here uncovered possible unlawful discrimination (1) of a kind not raised by the claimant; and (2) not affecting the claimant. Id. at 54-55. Thus, the court instructed that the proper procedure would be the filing of a charge by a member of the EEOC and for a full EEOC investigation of that new claim of discrimination. Accordingly, the court dismissed the EEOC’s clothing allowance claim without prejudice. Id. at 56.

Implications For Employers

With an increasingly diverse workforce employing more transgender employees, employers would be wise to adopt an inclusive mentality in order allow their business to nurture a broader range of perspectives while also protecting against potential discrimination liability. As this was a favorable ruling for the employer, businesses with sincerely held religious beliefs can use this as a template to seek protection under RFRA exemptions when defending against various discrimination claims, including those brought on behalf of transgender employees. Until Title VII eventually incorporates transgender discrimination, the EEOC will continue to bring sex discrimination claims on behalf of transgender employees, but will use this opinion to remedy flaws in their strategy, for instance, in their approach to the least restrictive means test for gender-based dress code policies.

Instead of taking a reactionary approach and waiting for Title VII to evolve or for the EEOC to remedy their case theories, employers should be proactive in revising their policies to be gender-neutral when possible and contemplative of any employment requirement that might affect transgender employees. As both employees and laws change, employers should follow suit now before having to pay to defend one later.