Pursuant to a recent decision issued by the U.S. Equal Employment Opportunity Commission (EEOC), discrimination based on gender identity, change of sex, or transgender status now constitutes sex discrimination in violation of Title VII of the Civil Rights Act of 1964 (Title VII).

On April 24, 2012, the EEOC rendered this important decision in a case brought by Mia Macy, a transgender female, against Attorney General Eric Holder and the Department of Justice Bureau of Alcohol, Tobacco, Firearms and Explosives (the "Bureau") for discrimination based on transgender status. Macy had applied for a job with the Bureau while still presenting as a male. After receiving confirmation from the Bureau that she would receive the job pending completion of a background check, Macy informed the Bureau that she was about to have a sex change to become a female. Shortly thereafter, the Bureau told Macy that due to budgetary constraints the position she was seeking was no longer available. However, upon further inquiry by Macy, the Bureau indicated that someone else had been hired for the position.

Macy filed a complaint with the Bureau, alleging discrimination based on sex, gender identity (transgender woman), and sex stereotyping due to her sex change. The Bureau accepted her complaint but stated that it would process her sex discrimination claim under Title VII and EEOC regulations and separately process her gender identity and sex stereotyping claims under the Bureau's own adjudication process. Essentially, the Bureau was treating only Macy's sex discrimination claim as actionable under Title VII. Macy appealed this determination to the EEOC.

The EEOC found that the Bureau had erroneously broken Macy's complaint into separate claims, when, in reality, she had a single claim of discrimination based on sex. Title VII prohibits discrimination based on sex, which encompasses not just a person's biological sex but also gender stereotyping, such as discrimination based on an expectation of how a man or woman should appear and behave. The EEOC relied primarily on the U.S. Supreme Court's landmark decision in Price Waterhouse v. Hopkins, 490 U.S. 228 (1989), in which the Court found that sex stereotyping constitutes discrimination based on sex under Title VII. The Court explained that "[i]n the context of sex stereotyping, an employer who acts on the basis of a belief that a woman cannot be aggressive, or that she must not be, has acted on the basis of gender." Hopkins, 490 U.S. at 250. Based on Hopkins, the EEOC concluded that Title VII necessarily prohibits discrimination based on transgender status, which can be manifested as discrimination "against an employee because the individual has expressed his or her gender in a non-stereotypical fashion, because the employer is uncomfortable with the fact that the person has transitioned or is in the process of transitioning from one gender to another, or because the employer simply does not like that the person is identifying as a transgender person." Macy v. Holder.

The EEOC's decision clarified federal discrimination law as it applies to transgender people. Although the facts of the underlying case involved alleged discrimination in the government sector, the EEOC's decision is equally applicable to the private sector. Thus, private sector employers should be aware that the EEOC will consider discrimination against transgender employees or applicants to be prohibited by Title VII.