Setting the stage for the U.S. Supreme Court to tackle the issue, the Seventh Circuit Court of Appeals (which covers Illinois, Indiana, and Wisconsin) yesterday overturned decades of precedent and held that Title VII of the Civil Rights Act of 1964 prohibits employment discrimination based on sexual orientation.

How Did We Get Here?

In 2014 Kimberly Hively, a part-time adjunct professor at Ivy Tech Community College and open lesbian, alleged that Ivy Tech had discriminated against her in violation of Title VII by blocking her full-time employment and terminating her on the basis of her sexual orientation. The district court dismissed her complaint, and last July, a three-judge panel of the Seventh Circuit reluctantly affirmed the district court’s dismissal. Hively then requested that the full Seventh Circuit review the decision, and the Seventh Circuit agreed. An 8-3 majority of the court concluded that discrimination based on sexual orientation is “sex” discrimination that is prohibited by Title VII. Accordingly, the court held that Hively had sufficiently stated a claim for discrimination under Title VII, reversing its July 2016 panel decision.

The Court’s Analysis

The majority opinion’s author, Chief Judge Diane Wood, began by explaining the “bizarre results” that courts have reached by applying the prevailing view that sexual orientation is not a protected trait under Title VII but certain other, related traits are protected, most notably gender nonconformity. This distinction arose in part from Price Waterhouse v. Hopkins, 490 U.S. 228 (1989), in which the Supreme Court held that discrimination based on “sex stereotypes” is prohibited sex discrimination. Further, in Oncale v. Sundowner Offshore Servs., Inc., 523 U.S. 75 (1998), the Court held that same-sex harassment was actionable under Title VII. Even in areas outside employment, the majority noted, the Supreme Court has expanded protections for gay people, culminating in its decision legalizing same-sex marriage, Obergefell v. Hodges, 135 S.Ct. 2584 (2015).

The majority reasoned that discrimination based on sexual orientation is sex discrimination prohibited by Title VII under two different methods of analysis. First, under what the court termed the “comparative method,” it found that if Hively had been a man involved with a woman, and everything else had stayed the same, Ivy Tech would not have refused to promote or terminated her. This, the majority found, “describes paradigmatic sex discrimination,” and concluded it could not be distinguished from a claim like the one in Hopkins, where the plaintiff alleged that she was not promoted because she was too “masculine.” Referring to the Seventh Circuit’s July 2016 decision, the majority noted:

Our panel described the line between a gender nonconformity claim and one based on sexual orientation as gossamer-thin; we conclude that it does not exist at all. Hively’s claim is no different from the claims brought by women who were rejected for jobs in traditionally male workplaces, such as fire departments, construction, and policing. The employers in those cases were policing the boundaries of what jobs or behaviors they found acceptable for a woman (or in some cases, for a man). . . . Any discomfort, disapproval, or job decision based on the fact that the complainant—woman or man—dresses differently, speaks differently, or dates or marries a same-sex partner, is a reaction purely and simply based on sex.

The majority also reasoned that sexual orientation discrimination is prohibited by Title VII based on the “associational” theory, where a plaintiff suffers discrimination based on the protected trait of someone with whom she associates. This theory originated with Loving v. Virginia, 388 U.S. 1 (1967), in which the Supreme Court struck down Virginia’s law prohibiting interracial marriage. The Loving Court reasoned that since the legality of the conduct could be determined by changing the race of one partner (e.g., from African-American to white), the law rested on discriminatory race-based distinctions. The majority drew a parallel to Loving, noting that if the sex of one partner in a same-sex relationship is changed, the outcome is different, meaning the distinction is impermissibly based on sex.

Judges Posner and Flaum wrote separate concurring opinions, which agreed with the ultimate conclusion that Title VII prohibited sexual orientation discrimination, but disagreed with the underlying rationale for this conclusion relied on by the majority.

Writing for the dissent, which was joined by two judges, Judge Diane Sykes decried the decision as a “circumvention of the legislative process” that “comes at a great cost to representative self-government.” Relying on the dictionary definition of “sex,” the dissent argued that the term cannot fairly be understood to include “sexual orientation,” and cited several examples of laws Congress has passed that have specifically referenced both “sex” and “sexual orientation.”

Supreme Court Review

Effective immediately, employees in Illinois, Indiana, and Wisconsin may bring claims of sexual orientation discrimination under federal law. This puts the Seventh Circuit at odds with other circuits, including some, such as the Eleventh Circuit, which have recently upheld prior precedent holding that Title VII does not explicitly prohibit sexual orientation discrimination. Due to the importance of the issue and the emerging circuit split, the Supreme Court is likely to address the issue in the near future. If the Court agrees to hear this case, it will be heard during the Fall 2017 term before a full nine-member court with a conservative majority. Whether the Court would affirm the Seventh Circuit’s interpretation is far from clear.

What Hively Means for Employers

Illinois and Wisconsin already have state laws prohibiting discrimination based on sexual orientation, so employers in those states should already have up-to-date policies and procedures ensuring equal employment opportunity for gay and lesbian employees. Indiana does not have a similar state law, so employers there should review their policies, employment practices and training to include sexual orientation as a protected class.

Also, while this decision does not specifically address transgender employees, much of the court’s reasoning that sexual orientation discrimination is indistinguishable from “sex stereotyping” discrimination prohibited by Title VII under prior Supreme Court precedent would presumably apply to discrimination against employees based on transgender status. Therefore, employers should ensure anti-discrimination policies encompass gender identity.