Finding the Equal Employment Opportunity Commission failed to accommodate the religious beliefs of a funeral home’s owner who fired a transgender employee under the Religious Freedom Restoration Act, a federal district court has dismissed the Commission’s discrimination lawsuit brought under Title VII of the Civil Rights Act. EEOC v. R.G. & G.R. Harris Funeral Homes, Inc., No. 14-13710 (E.D. Mich. Aug. 18, 2016).

The court discussed the treatment of transgender employees, the application of the RFRA as a defense against government action, sex-specific grooming and dress rules, and the EEOC’s ability to file a lawsuit outside the scope of the charging party’s discrimination charge.

Background

Michigan-based R.G. & G.R. Harris Funeral Home is a closely held for-profit corporation that has been operated by Thomas Rost and his family for several generations. While it is not affiliated with any church and does not require its employees to hold any religious views, Rost is affiliated with a Baptist Church and operates his funeral home as “a ministry to serve grieving families.” The funeral home dress-code policies and practices require male funeral directors to wear a pants-suit and tie and female funeral directors to wear a skirt-suit.

In 2007, the funeral home hired Anthony Stephens, who presented as a male, as a funeral director/embalmer. On July 31, 2013, Stephens notified the funeral home that she was transitioning to a transgender female and would return from a scheduled vacation presenting full-time as female in appropriate business attire. On August 15, 2013, Rost terminated Stephens when she insisted on wearing skirt-suits. Stephens understood she was fired because “coming to work dressed as a woman was not going to be acceptable.”

Stephens filed a charge of discrimination with the EEOC alleging she was fired because of her sex and gender identity in violation of Title VII. The funeral home said in a position statement that Stephens was terminated for refusing to comply with the funeral home’s dress code.

The EEOC found reasonable cause to believe that: (1) Stephens was fired due to her sex and gender identity in violation of Title VII; and (2) the funeral home discriminated against its female employees by providing a clothing benefit (supplying business clothing) to males that was denied to females.

On September 25, 2014, the EEOC, for the first time ever, filed two lawsuits alleging discrimination based on gender identity discrimination (this case and EEOC v. Lakeland Eye Clinic (No. 8:14-cv-2421-T35 AEP, M.D. Fla., filed Sept. 25, 2014, settled April 9, 2015)).

The district court denied the funeral home’s motion to dismiss on the grounds that under Sixth Circuit law, the EEOC’s complaint stated a valid claim for sex-stereotyping sex-discrimination. (The Sixth Circuit has jurisdiction over Kentucky, Michigan, Ohio, and Tennessee.) However, the court rejected the EEOC’s argument that gender identity or transgender status was protected under Title VII. The funeral home then asserted the EEOC’s actions violated the funeral home’s rights under RFRA.

Pre-trial discovery focused on the funeral home’s dress-code practices and Rost’s religious beliefs. Rost testified that he believed a “person’s sex is an immutable God-given gift” and he would be “violating God’s commands if he permitted a funeral director to deny their sex while acting as a representative of the funeral home.” Rost also testified he would not have fired Stephens solely because of her transgender status or because she dressed as a woman outside of work. Rather, Rost testified the reason he fired Stephens was because “he would no longer dress as a man.”

As to clothing benefits, the funeral home had provided full-time male employees who interact with the public two suits, ties, and replacements free of charge. After the EEOC filed its lawsuit, the funeral home began paying full-time females who interact with the public an annual clothing stipend of $150 and pledged to provide female funeral directors skirt-suits in the same manner as suits are provided to males.

At the conclusion of discovery, the EEOC and the funeral home filed cross motions for summary judgment.

EEOC Established Sex Discrimination by Demonstrating Sex-Stereotyping

The U.S. Supreme Court endorsed a gender-stereotyping framework to prove Title VII discrimination in Price Waterhouse v. Hopkins, 490 U.S. 228 (1989). The Supreme Court ruled Title VII requires that gender be irrelevant to employment decisions. The district court found that the Sixth Circuit has read Price Waterhouse more broadly than other appellate courts. The Sixth Circuit said, “After Price Waterhouse, an employer who discriminates against women because, for instance, they do not wear dresses or makeup, is engaging in sex discrimination because the discrimination would not occur but for the victim’s sex.”

The court ruled that Rost’s deposition testimony was direct evidence of gender-stereotyping: he terminated Stephens, a biologically born male, because she would no longer dress as a man.

Sex-Specific Dress Code Not a Valid Defense

The funeral home argued that Sixth Circuit law had permitted differential grooming and dress codes based on sex, but the court found that those cases pre-dated Price Waterhouse. The funeral home also asserted that post-Price Waterhouse dress/grooming law from other circuits supported its sex-specific dress code. The court, however, explained the Sixth Circuit’s firm endorsement of sex-stereotyping precluded following other circuits’ law on dress codes. The court rejected the funeral home’s sex-specific dress-code defense to the Title VII sex-stereotyping claim.

Funeral Home Entitled to RFRA Exemption

RFRA prohibits the government from substantially burdening a person’s exercise of religion unless the government shows that application of the burden “to the person”:

1. is in furtherance of a compelling governmental interest; and

2. is the least restrictive means of furthering that compelling governmental interest.

The district court found the funeral home was considered a person for purposes of RFRA protection. Burwell v. Hobby Lobby Stores, Inc., 134 S.Ct. 2751 (2014). It also found the EEOC’s actions created a substantial burden on the exercise of the funeral home’s religion. The court questioned whether the EEOC had shown a compelling government interest in its lawsuit, but assumed it had. However, the court found the EEOC failed to show the burden on the funeral home was the least restrictive means of furthering the government’s interest.

The court noted the EEOC’s briefs did not indicate the agency had considered any solutions or potential accommodations other than allowing Stephens to wear a skirt. The court reasoned that had the EEOC been truly interested in ensuring Stephens had not been subject to gender stereotyping, it would have proposed a gender-neutral dress code allowing all funeral directors to wear a dark suit consisting of business jacket without a neck tie. Stephens had testified that it would be appropriate for women to wear a pants-suit.

Dismissing the EEOC’s claim on behalf of Stephens, the court indicated that had Stephens, and not the EEOC, brought the lawsuit, the RFRA defense would not have applied because the Sixth Circuit has held the RFRA does not apply in a lawsuit between private parties.

Clothing Benefit Claim Dismissed

As to the EEOC’s claim that the funeral home’s policy of providing clothing benefits to males and not females violated Title VII, the court observed that Stephens had not raised the issue and it did not affect Stephens. The court said the EEOC must file a separate Commissioner’s charge before challenging the practice in court. Because the EEOC had not done so, the court dismissed the EEOC’s claim.

Implications

Employers should continue a thoughtful approach to issues relating to transgender employees, dress and grooming codes, and possible objections by other staff based on sincerely held religious beliefs. Employers should keep in mind the following:

• This court found that taking adverse action against a transgender employee who dresses consistently with his or her gender presentation constitutes direct evidence of discrimination.

• This court rejected prior case law giving deference to employers in setting sex-specific grooming and dress requirements.

• The court cautioned that RFRA defenses will not apply in lawsuits brought by individuals, rather than government entities, such as the EEOC.

• Employment claims by transgender employees often are more complex than the facts in this case. A transgender employee may allege a hostile work environment or denial of sex-specific bathrooms associated with that employee’s identified gender.

• State law and municipal ordinances increasingly protect transgender employees or prohibit sex-specific grooming and dress requirements.

• Employers must continue to be cautious and engage in the interactive process in good faith in responding to transgender and religious accommodation requests. This case, due to the unique aspect of RFRA, the EEOC was faulted for failing to consider a gender-neutral dress code and engage with the funeral home on other less restrictive accommodations. Often, the employer is the one put under the microscope in considering alternatives. Therefore, it is important for employers to consider alternatives, even if they are deemed unacceptable by either party.

• Employers must review their dress code and other policies to minimize the possibility of disparate treatment or disparate impact claims.

• The growing number of transgender laws and regulations should encourage employers to develop comprehensive training for managers and staff on the gender-transition process, including usage of restrooms, locker rooms or fitting rooms, name change and misgendering, “go live” dates and timelines, leaves of absences, and how to respond to potential religious and other objections by staff, among other issues.

Sex-stereotyping policies and practices challenge employers on many fronts, including appropriate workplace treatment of LGBTQ (lesbian, gay, bisexual, transgender, queer or questioning) employees. Jackson Lewis can assist employers in preparing workplace policies, in conducting training, and with gender-transition plans and accommodations.