Executive Summary: In a landmark decision overruling decades of precedent, the Seventh Circuit en banc declared that sexual orientation discrimination violates Title VII in Hively v. Ivy Tech Community College. This comes as the first decision of its kind. The Seventh Circuit’s decision was followed by a Second Circuit panel decision days later in Zarda v. Altitude Express reaffirming its recent holding in Christiansen v. Omnicom that the long-held view that sexual orientation is not considered to be a protected class under Title VII remains good law. It is now unquestionable that the Circuits have split on the matter.

Background: Since Title VII was passed in 1964, the Circuit Courts have all held that sexual orientation is not a protected class. With the 1989 decision by the U.S. Supreme Court in Price Waterhouse v. Hopkins that gender stereotyping is discrimination “because of sex,” the courts have been left to distinguish between discrimination based on gender stereotypes and discrimination based on sexual orientation. Hively came to the Seventh Circuit on appeal from the trial court’s decision on a motion to dismiss in which the lower court determined the claim was one of sexual orientation discrimination, and therefore, consistent with prior precedent, dismissed the lawsuit. On appeal, the Seventh Circuit panel was also bound by this precedent and (similar to the panel of the Eleventh Circuit in Evans v. Georgia Regional Hospital and the Second Circuit panel in Christiansen v. Omnicom), noted that an en banc decision was necessary to overturn prior precedent. Hively moved for reconsideration en banc.

The Decision: In holding, for the first time, that sexual orientation is protected under Title VII, the majority, in an opinion authored by Chief Judge Diane Wood, determined that “actions taken on the basis of sexual orientation are a subset of actions taken on the basis of sex,” and, therefore, violate Title VII’s prohibition of discrimination “because of sex.” Key to this determination was the opinion — articulated as early as 1971 in Sprogis v. United Air Lines, Inc.— that among the purposes of Title VII is to “strike[] at the entire spectrum of disparate treatment of men and women resulting from sex stereotypes.”

Two lines of prior Supreme Court cases guided the Seventh Circuit. The first included those applying Title VII to situations other than classic disparate treatment claims – i.e., making a decision because an employee is of a specific biological gender. Of particular importance to the decision were the Supreme Court decisions in Oncale v. Sundowner Offshore Services, Inc. (recognizing same-sex harassment as a violation of Title VII) and Hopkins (recognizing gender stereotyping as a violation of Title VII). In particular, the majority was guided by the Oncale Court’s observation that statutory protections often go beyond the “principal evil” that the legislature was concerned with at the time the law was enacted to cover “reasonably comparable evils.” The court concluded that using both the comparative approach and associational approach, Title VII must include a prohibition against sexual orientation discrimination. Under the former, the Seventh Circuit reasoned that Hively had been discriminated against “because of” her sex in that she suffered an adverse employment action because she was married to a woman, while a man married to a woman would not have been treated the same. As to the latter, the court compared Hively’s same-sex marriage to that of interracial marriage. In Loving v. Virginia, the U.S. Supreme Court held that a state-wide ban on interracial marriage violated the Equal Protection Clause of the Fourteenth Amendment. In the same way, the Hively majority held that discriminating against an employee involved in a same-sex marriage violates Title VII.

The second line of cases looked to more recent Supreme Court precedent outside of the employment context that has recognized that same-sex couples are entitled to broader civil rights protection. In particular the Hively court looked to Romer v. Evans (Colorado Constitutional provision that prohibited government protection of “homosexual, lesbians or bisexual persons” violated the Equal Protection Clause), Lawrence v. Texas (statute criminalizing sodomy violated the Substantive Due Process Clause), United States v. Windsor (Defense of Marriage Act defining marriage as that between a man and woman violated Equal Protection and Due Process Clauses) and Obergefell v. Hodges (legalizing same-sex marriage).

Although the Hively court recognized that there is precedent to maintain the current state of the law in which sexual orientation discrimination remains untouchable by Title VII as noted by the dissenting opinion, “[i]t would require considerable calisthenics to remove the word ‘sex’ from ‘sexual orientation’” and that “[t]he effort to do so has led to confusing and contradictory results….” As such, the court concluded that it is “common sense reality that it is actually impossible to discriminate on the basis of sexual orientation without discriminating on the basis of sex.”

Update from Other Circuits: Despite the Hively decision, the law in other Circuits remains the same. In fact, just days after the Hively decision was released, in Zarda v. Altitude Express, the Second Circuit reaffirmed its opinion in Christiansen that sexual orientation discrimination does not violate Title VII. While the Zarda court recognized that the Hively court had ruled otherwise, it distinguished its position from Hively in that, as a panel of the Second Circuit, it had no authority to overturn prior precedent. There is no indication that the plaintiffs in either Christiansen or Zarda will seek rehearing en banc by the Second Circuit. However, a petition for rehearing en banc by the Eleventh Circuit has been sought in Evans. A decision on that petition has not yet been made.

What Does This All Mean? The decision in Hively has left the Circuits, for the first time, divided on the issue of Title VII’s protections for sexual orientation. Additionally, employers in the Seventh Circuit must assume that this decision encompasses gender identity and transgender status as well. Thus, the LGBTQ community has significantly more federal protections in the Seventh Circuit – which includes Illinois, Wisconsin and Indiana – than in other U.S. jurisdictions. This will remain the case until other Circuit Courts, sitting en banc, follow Hively’s groundbreaking decision and, perhaps, the U.S. Supreme Court provides the ultimate decision to guide the country as a whole.

Bottom Line: Hively should have little practical effect on Illinois and Wisconsin employers, who are already ruled by state law prohibiting sexual orientation discrimination. Indiana employers, however, should be aware that to the extent their policies and practices do not protect LGBTQ employees from discrimination, their policies should be updated to reflect the new state of the law. Additionally, employers operating in multiple states should recognize that legal obligations regarding the need to address sexual orientation and/or gender identity in the workplace now, more than ever, may vary depending upon the state. As a best practice, it is highly recommended that all employers, regardless of the state(s) in which they operate, have a comprehensive anti-discrimination and anti-harassment EEO policy that specifically prohibits sexual orientation and gender identity discrimination and harassment, and a complaint procedure so that employees who do experience such discrimination/harassment have an avenue to make the employer aware of the problem. Additionally, every employer should develop an investigation and resolution procedure for such complaints.