Federal Anti-Discrimination Law May Protect LGBT Employees Notwithstanding North Carolina's New Anti-LGBT Statute

Title VII does not list sexual orientation or transgender status among its protected categories. North and South Carolina are not among the 22 states that have outlawed discrimination in public and private employment on the basis of sexual orientation or the 19 states that have outlawed employment discrimination based on gender identity.

On March 23, 2016, North Carolina enacted legislation that prohibits cities and counties from adopting their own anti-discrimination ordinances and makes clear that the public policy of North Carolina does not protect the rights of LGBT employees. The new North Carolina legislation overrules Charlotte’s recently adopted human relations ordinance, which extended certain protections – though not employment rights – to LGBT individuals. The statute prohibits cities or counties from enacting any ordinance to protect the rights of LGBT employees or consumers.

So may employers in the Carolinas safely conclude that they cannot be held liable for discrimination against LGBT employees? Not according to the Equal Employment Opportunity Commission and the decisions of an increasing number of federal courts.

At the outset, employers should note that many non-legal grounds – including fairness, promotion of a diverse work force and prudent business practice – may strongly favor equal treatment of LGBT employees and customers. Most employers today enforce policies that prohibit discrimination against LGBT individuals. Instances of discrimination, however, still occur, and LGBT employees may attempt to assert claims of discrimination based on their sexual orientation or gender identity, even when those claims lack merit.

In light of recent legal developments, it is not sufficient to defend such claims merely by asserting that the statute under which they are brought – usually Title VII of the Civil Rights Act of 1964 – simply does not apply. Although Title VII does not expressly prohibit discrimination on the basis of sexual orientation or gender identity, the EEOC and a growing number of courts consider such treatment to be sex discrimination under Title VII.

Sexual Orientation

In Baldwin v. Foxx, an administrative appeal decided on July 16, 2015, the EEOC ruled that “sexual orientation is inherently a ‘sex-based consideration,’ and an allegation of discrimination based on sexual orientation is necessarily an allegation of sex discrimination under Title VII.” EEOC Appeal No. 0120133080, 2015 WL 4397641, at *5. The decision emphasized that an LGBT employee could show that sexual orientation discrimination was sex discrimination when (1) “it involved treatment that would not have occurred but for the individual’s sex;” (2) “it was based on the sex of the person(s) the individual associates with;” and/or (3) “it was premised on the fundamental sex stereotype, norm, or expectation that individuals should be attracted only to those of the opposite sex.” Id. at *10.

The EEOC cited decisions from federal district courts in Washington and Oregon. These courts already had adopted the view that “sexual orientation is inseparable from and inescapably linked to sex,” and thus, Title VII’s prohibition on sex discrimination already bars discrimination on the basis of sexual orientation. Courts in other jurisdictions may follow suit.

In support of its decision, the EEOC also noted that courts have routinely and consistently held that Title VII prohibits associational discrimination, whether based on race, sex or some other protected characteristic. Courts repeatedly have invoked this theory to prohibit employers from discriminating against an individual because of the race of his or her spouse. Thus the EEOC concluded that Title VII prohibits employers from discriminating against employees “based on the fact that such individuals are in a same-sex marriage or because the employee has a personal association with someone of a particular sex.” Id. at *7.

Finally, citing the Supreme Court’s decision in Price Waterhouse v. Hopkins, 490 U.S. 228 (1989), the EEOC stated that sexual orientation discrimination is sex discrimination “because it necessarily involves discrimination based on gender stereotypes.” Id. A number of courts – including the Fifth Circuit and district courts in Ohio, California, Connecticut and the District of Columbia – had previously ruled that sexual orientation discrimination based on gender stereotypes violates Title VII. In older decisions, a few courts have disagreed.

Gender Identity

In Macy v. Holder, the EEOC ruled that discrimination against an individual because of transgender status (also known as gender identity discrimination) is sex discrimination under Title VII. EEOC Appeal No. 0120120821, 2012 WL 1435995 (EEOC Apr. 20, 2012). Quoting from a Ninth Circuit decision, the EEOC reasoned that under Title VII, “the term ‘sex’ encompasses both sex – that is, the biological differences between men and women – and gender.” Id. at *5. The EEOC also relied on the holding in Price Waterhouse v. Hopkins, discussed above.

The EEOC noted that a transgender person could establish a prima facie case discrimination just as any other person could – by showing the employer’s action was “motivated by hostility, by a desire to protect people of a certain gender, by assumptions that disadvantage [one sex], by gender stereotypes, or by the desire to accommodate other people’s prejudices or discomfort.” 2012 WL 1435995 at *11.

Many federal courts – including the Sixth Circuit Court of Appeals and the Eastern District of North Carolina – have upheld the rights of transgender employees to assert claims of discrimination based on gender identity. In holding that Title VII bars discrimination based on gender identity, court decisions are even more uniform than decisions addressing whether Title VII bars discrimination based purely on sexual orientation. The trend seems clear that courts increasingly will rule that both forms of discrimination violate Title VII.

Same-Sex Marriage

Last year in Obergefell v. Hodges, 135 S. Ct. 2071 (2015), the Supreme Court held that the 14th Amendment to the U.S. Constitution required states to license same-sex marriage and recognize same-sex marriages performed in other states. Employers in all states must offer the same spousal benefits to LGBT employees as they do to heterosexual employees. As noted above, Title VII’s prohibition of associational discrimination means that an employer may not discriminate in any term or condition of employment because an employee is in a same-sex marriage or other relationship.

Under the EEOC’s decisions, as well as applicable court precedents, no defense to a claim of discrimination results from asserting that working with employees who have same-sex relationships might purportedly offend the religious sensibilities of other co-workers. Just as employees cannot invoke religion to refuse to work with co-worker of a different race or sex, employees cannot claim religion as a basis to refuse to work with LGBT employees.

Conclusion and Recommendations

In sum, North Carolina’s new legislation offers no protection to employers that may run afoul of federal law by discriminating against LGBT employees. To ensure compliance with the evolving federal law in this area, employers should at a minimum consider:

• Including sexual orientation and transgender status in their policies prohibiting discrimination and workplace harassment;
• Providing that spousal benefits apply equally to employees in same-sex marriages and employees in heterosexual marriages; and 
• Ensuring that LGBT employees are treated equally and with the same respect as all other employees.