On February 26, 2018, the U.S. Court of Appeals for the Second Circuit issued an en-banc opinion holding that an employment action based on sexual orientation is discrimination based on sex.

In Zarda v. Altitude Express, a skydiving instructor told a skydiving customer he was gay. Zarda claimed he made the comment because instructors and customers were strapped "hip-to-hip" in an intimate nature. After the customer's boyfriend later complained to Zarda's employer about the comment, Zarda's employment was terminated. Zarda brought an employment discrimination lawsuit against Altitude Express, claiming that he was terminated because of his sexual orientation, which necessarily involved his sex. The trial court ruled for Altitude Express, holding that sexual orientation claims were not cognizable under Title VII.

On appeal, the Second Circuit en banc reversed its earlier case law and held that discrimination based on sexual orientation is a subset of sex discrimination. The decision follows last year's decision in Hively v. Ivy Tech Cmty. Coll. of Indiana, where the U.S. Court of Appeals for the Seventh Circuit held that sex discrimination encompasses claims of sexual orientation. Both Hively and Zarda follow the EEOC's 2015 interpretation that sexual orientation discrimination is sex discrimination. The decisions in Hively and Zarda make it increasingly likely the U.S. Supreme Court will take up the issue in the near future.