North Carolina made waves last week by enacting legislation prohibiting cities from allowing transgender individuals to use public restrooms that match their gender identity and further restricting cities from passing anti-discrimination ordinances that would give protected status to sexual orientation or gender identity.

Employers in North Carolina and across the country, however, should be aware of the trend in the federal courts and agencies to grant protections to transgender workers under Title VII of the Civil Rights Act. Last week two federal courts allowed transgender plaintiffs to proceed with their gender discrimination claims, representative of the growing acceptance of sex stereotyping or gender nonconformity theories under these circumstances.

In Fabian v. Hospital of Central Connecticut, No. 3:12-cv-01154 (D. Conn. Mar. 18, 2016), the District of Connecticut denied summary judgment to a hospital on a surgeon’s sex bias claims.  The surgeon alleged that the hospital failed to hire her after learning of her plan to transition from male to female.  Tracing the history of transgender claims under Title VII, Judge Underwood, a well-respected jurist in the district, noted that although most early cases considering the issue held that Title VII does not protect transgender individuals, courts more recently have allowed such claims to proceed on a theory that the term “sex” in Title VII refers to discrimination based on factors related to or having something to do with sex.

The District of Arizona reached a similar conclusion in Doe v. Arizona, No. 2:15-cv-02399 (D. Ariz. Mar. 21, 2016).  In that case, a male transgender correctional officer alleged he was not safe at work because his coworkers, who referred to him as “he/she” or “it,” would not respond to his emergency calls.  The court denied Arizona’s motion to dismiss, finding that the plaintiff’s allegation of transgender status satisfied the “protected status” element of a gender discrimination claim under Title VII.  (While not the subject of this post, this case also has important implications regarding failure to exhaust administrative remedies for retaliation claims.)

These courts join a number of federal courts – including the First, Sixth, Ninth, and Eleventh Circuits –that have extended protections to transgender individuals under the sex discrimination provisions of Title VII or Section 1983.  Federal agencies also have expressed their intent to enforce protections for transgender workers.  For instance:

• The EEOC interprets Title VII as prohibiting discrimination based on gender identity, a position asserted against a Florida-based organization of health care professionals, resulting in a consent decree in 2015, and against a Michigan funeral home in a lawsuit surviving a motion to dismiss.

• Pursuant to Executive Order 13672, federal contractors are now prohibited from discriminating on the basis of gender identity, and OFCCP has issued amended regulations incorporating this prohibition.

• OSHA has issued a guide advising that transgender employees should be permitted access to restrooms and locker rooms consistent with their gender identity.

• Regarding the implementation of Section 1557 of the Affordable Care Act, the Department of Health and Human Services has issued a Notice of Proposed Rulemaking, which would incorporate discrimination on the basis of gender identity into the definition of “on the basis of sex.”

Thus, even if North Carolina’s law survives the recent legal challenge in court, employers should be aware that federal law may still grant protections to transgender workers.  Indeed, in January 2015, the Eastern District of North Carolina denied a hospital’s motion to dismiss a claim of sex discrimination brought by a certified nursing assistant alleging she was denied a position based on her transgendered status.

Additionally, regardless of the viability of a claim for transgender discrimination under federal law, at least sixteen states – including California, Illinois, Maryland, Massachusetts, New Jersey – and the District of Columbia, now include gender identity as a protected characteristic under their discrimination laws.  Employers outside of North Carolina should know whether state or local law provides similar protections.

Employers are advised to take a proactive role in preventing transgender, or gender identity, discrimination in the workplace and to have a plan in place to accommodate the potential needs of transgender workers.