In a move that could have broad national effects on gay rights in the workplace, the Second Circuit ruled that discrimination based on sexual orientation violates Title VII of the Civil Rights Act, deciding in favor of the estate of a deceased skydiving instructor who was allegedly fired for telling a client he was gay.

On Monday, the United States Court of Appeals for the Second Circuit became the second federal appeals court to rule that Title VII encompasses sexual orientation discrimination in Zarda v. Altitude Express, joining the Seventh Circuit in its decision last year. This issue has divided courts for years, and even caused a split between the EEOC and the Department of Justice, with the former arguing in favor of including sexual orientation under Title VII’s protections and the latter arguing against it. The Second Circuit’s decision furthers a circuit split, which occurred when the Eleventh Circuit held that sexual orientation discrimination is not actionable under Title VII.

Chief Judge Robert A. Katzmann delivered the majority opinion and concluded, “Title VII’s prohibition on sex discrimination applies to any practice in which sex is a motivating factor. Sexual orientation discrimination is a subset of sex discrimination because sexual orientation is defined by one’s sex in relation to the sex of those to whom one is attracted, making it impossible for an employer to discriminate on the basis of sexual orientation without taking sex into account.”

In so holding, the majority adopted each of the theories advanced by the EEOC. Applying the “comparative test” to determine whether an employment practice constitutes sex discrimination, the court considered the example in the Seventh Circuit’s decision Hively v. Ivy Tech Community College. The court compared a lesbian woman to a heterosexual man and rejected the framing urged by the government, which would compare a woman attracted to people of the same sex with a man attracted to people of the same sex.  Finding that sexual orientation acts as a proxy for sex, the majority concluded that a lesbian treated differently than a heterosexual man due to her sexual orientation would not have been subject to an adverse action “but for” her sex.

The majority opinion also concluded that sexual orientation discrimination constitutes actionable gender stereotyping, held to be unlawful under Price Waterhouse v. Hopkins, and associational discrimination, borrowing principles from Loving v. Virginia.

In dissent, Judge Lynch argued that Congress did not intend to cover sexual orientation discrimination when drafting Title VII. The majority court acknowledged this fact, but also recognized that the legal framework for evaluating Title VII claims has changed dramatically over time. “Because Congress could not anticipate the full spectrum of employment discrimination that would be directed at the protected categories,” Katzmann explained, “it falls to courts to give effect to the broad language that Congress used.”

Employers operating within the Second Circuit – comprising New York, Connecticut, and Vermont – already should have in place policies prohibiting sexual orientation discrimination because those state laws expressly prohibit such conduct. But this decision provides a roadmap for the potential adoption by other circuits around the country, and suggests that the Supreme Court may settle the current circuit split.  Thus, employers are encouraged to adopt nationwide policies prohibiting sexual orientation discrimination to the extent they have not done so.

Additionally, the sweeping adoption by the majority opinion of the positions pressed by the EEOC should signal to employers to take seriously the actions by and guidance from the EEOC in this and other matters. For example, the EEOC will finalize new enforcement guidance on harassment shortly, and employers should expect the EEOC to aggressively enforce that guidance, including with respect to harassment based on sexual orientation.