Although transgender individuals are protected from employment discrimination by law in sixteen states and the District of Columbia, and five more states prohibit such discrimination by government employers, federal nondiscrimination law does not explicitly prohibit discrimination against transgender individuals. The Equal Employment Opportunity Commission, however, recently ruled in Macy v. Holder that employment discrimination against transgender individuals is a form of sex discrimination, and thus violates Title VII of the Civil Rights Act of 1964. Therefore, employers subject to Title VII—all those with 15 or more employees—may not make employment decisions based on the transgender status of applicants or employees—no matter in what state they do business.

In order to understand the EEOC’s ruling and its significance for employers, it is important to understand the difference between sex, which is biologically determined, and gender, which is the cultural behaviors, appearance and expectations that society assigns for males versus females. A transgender individual may be biologically male, but may identify or express an appearance or behaviors that are female—or vice versa. Individuals whose gender is different from their biological sex may be transgender—whether or not they act to change their physical appearance or use surgery to appear more like the gender with which they identify. A recent study found that roughly one-half of one percent of individuals in the United States are transgender.

In the Macy case, the charging party, Ms. Macy, claimed that she had been promised a position with the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives when she applied as a male. During the pre-employment background check, when she notified the agency that she was transitioning to a female gender, the offer was withdrawn, under circumstances that suggested that the employer’s decision may have been motivated by Macy’s gender transition.

In the past, transgender individuals seeking to sue for employment discrimination under Title VII were required first to demonstrate that Title VII prohibited discrimination against transgender individuals because it was a form of sex discrimination. They have been successful in doing so in several cases brought under Title VII in federal court, although courts have not be uniform in so ruling. And although the EEOC ruling does not necessarily mean that all federal courts will defer to its result or its reasoning, the ruling will clearly bolster litigants’ ability to successfully state a claim under Title VII for transgender discrimination before the EEOC.

According to the EEOC, Title VII’s term “sex” encompasses both biological sex and gender. The agency explained its rationale in this way:

When an employer discriminates against someone because the person is transgender, the employer has engaged in disparate treatment “related to the sex of the victim.” . . . This is true regardless of whether an employer discriminates 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. In each of these circumstances, the employer is making a gender-based evaluation . . .

Federal trial courts in earlier cases have ruled that an employer’s discomfort with the notion of a gender transition, concern that employees will object to a transgender female using a women’s restroom, or “moral” objections to transgender individuals were not justifications for refusals to hire or retain transgender employees.

The EEOC cited several justifications for its ruling that transgender discrimination is a form of sex discrimination. First, the employer may be applying “gender stereotypes” in refusing to hire, or in dismissing, a transgender employee because that individual’s dress and possibly the person’s behavior do not match society’s expectations for someone of the transgender individual’s biological sex (as opposed to the gender with which the individual identifies). The notion that disfavoring individuals because they do not conform to gender stereotypes is sex discrimination was first articulated in Price Waterhouse v. Hopkins, a 1989 opinion of the U.S. Supreme Court. Most subsequent court opinions involving allegations of sex discrimination by transgender individuals have used the sex stereotyping analysis. But the EEOC noted that this theory is only one way that a transgender individual may prove sex discrimination. “Title VII prohibits discrimination based on sex whether motivated by hostility, by a desire to protect people of a certain gender, by assumptions that disadvantage men, by gender stereotypes, or by the desire to accommodate other people’s prejudices or discomfort.”

A second type of transgender claim under Title VII could be that an employer was willing to hire (or retain) the transgender individual when that individual conformed with his or biological sex, but when the individual changed his or her gender identification, the employer was not willing to hire or retain the employee on the basis of the “new” gender—another form of sex discrimination. According to the EEOC, such an action would be intentional sex discrimination.

The EEOC’s ruling did not resolve Macy’s case on the merits; the Commission sent the case back to the agency for a ruling as to whether the employer’s decision to deny the position to Macy was based upon her transgender status. Whether or not federal courts adopt the EEOC’s reasoning that “intentional discrimination against a transgender individual because that person is transgender is, by definition, discrimination based on sex,” individuals filing complaints with the EEOC will be spared the need to establish that transgender discrimination is sex discrimination, and will need only to provide evidence that the decision they are challenging was made on the basis of their transgender status.

Changing societal attitudes toward transgender individuals, and the number of transgender individuals in our society, suggest that any employer may encounter transgender applicants or employees. Particularly if a current employee discloses that he or she is in the process of transitioning to a different gender, or if an employer hires a transgender individual, co-workers should be trained, consistent with protecting the transgender individual’s privacy, about the employer’s expectations for treating the transgender employee with dignity and respect. In particular, employers should stress that a transgender employee has the right to use the restroom that is consistent with the gender with which the individual identifies, and that co-workers must respect that right and behave accordingly. Requiring a transgender employee to use a separate restroom, or treating a transgender employee differently with respect to restroom use, may be grounds for a discrimination complaint. Furthermore, harassment or discrimination against a transgender employee, whether by supervisors, peers, clients or customers, is a form of sex discrimination, and employers need to respond just as they would in a case of sexual, racial, or ethnic harassment, and should work to prevent such discrimination. Changing societal attitudes toward transgender individuals, and the number of transgender individuals in our society, suggest that any employer may encounter transgender applicants or employees. Particularly if a current employee discloses that he or she is in the process of transitioning to a different gender, or if an employer hires a transgender individual, co-workers should be trained, consistent with protecting the transgender individual’s privacy, about the employer’s expectations for treating the transgender employee with dignity and respect. Harassment or discrimination against a transgender employee, whether by supervisors, peers, clients or customers, is a form of sex discrimination, and employers need to respond just as they would in a case of sexual, racial, or ethnic harassment, and should work to prevent such discrimination.