On July 31, 2023, the Seventh Circuit Court of Appeals revived a Christian teacher’s religious discrimination lawsuit over his refusal to refer to transgender students by their names and pronouns with which they identified. The case highlights the tension between discrimination against LGBTQ+ individuals and discrimination based on religion amid evolving and sometimes conflicting legal standards and guidance, including based on the Supreme Court of the United States’ heightened standard for undue hardship for religious accommodations.

Quick Hits

• The Seventh Circuit vacated the decision granting summary judgment to the school on the teacher’s claim the school failed to accommodate his religious beliefs/practices, agreeing the school was unable to accommodate the teacher’s religious beliefs and practices without imposing an undue hardship.

• The Seventh Circuit remanded the case back to the district court for further consideration in light of the Supreme Court of the United States’ new substantial costs standard for undue hardship articulated in the June 2023 decision in Groff v. DeJoy.

• The case could shed light on whether the alleged harm to transgender students and the disruption to the learning environment caused by accommodating a teacher’s refusal to use their names and pronouns rises to the level of undue hardship.

• The case could further examine whether alleged harm of potential Title IX lawsuits from transgender students is sufficient to support or bolster the school’s undue hardship defense.

A panel for the Seventh Circuit Court vacated its April 2023 decision that had a school summary judgment in a religious discrimination lawsuit under Title VII of the Civil Rights Act of 1964 from a Christian teacher who refused to use transgender students’ names and preferred pronouns. The Seventh Circuit had ruled that the school could not reasonably accommodate the teacher by allowing him to refer to all students by their last names only because doing so allegedly alienated transgender students and caused undue hardship to the school’s educational purpose.

The court remanded the case back to a federal district court for reconsideration “[i]n light of the” Supreme Court’s June 2023  decision in Groff v. DeJoy, which raised the burden on employers to claim that a religious accommodation causes an undue hardship under Title VII.

Background

John Kluge, who served as a high school orchestra teacher for the Brownsburg Community School Corp., asserted his sincerely held religious belief against promoting “transgenderism” conflicted with the school’s policy requiring all teachers to address transgender students by their names reflected in school records and chosen pronouns. The school policy permitted transgender students to change their names and pronouns in school records after presenting letters from a parent and a healthcare professional supporting the requested changes.

To accommodate Kluge’s religious beliefs, the school initially allowed Kluge to refer to students by their last names only and without using honorifics. Students complained the policy made the classroom setting “awkward” and that transgender students felt “isolated,” “targeted,” or “dehumanized.” The school then withdrew the accommodation. Kluge eventually filed a letter of resignation indicating he intended to resign at the end of his contract, which he attempted to withdraw before the school board accepted his resignation and terminated his employment.

Kluge then filed suit asserting claims of religious discrimination, failure to accommodate, and retaliation against the school. The school contended the last-name-only accommodation created an undue hardship because it caused the students emotional harm and placed the school on “the razor’s edge of liability” under Title IX of the Education Amendments of 1972, which prohibits discrimination on the basis of sex in education. A district court then granted the school summary judgment on all claims.

Undue Hardship

In the Seventh Circuit’s initial 134-page decision issued on April 7, 2023, affirming the district court’s grant of summary judgment, it agreed the harm to students and disruption to the learning environment constituted de minimis harms to the school’s conduct of its business. Following the Supreme Court’s Groff decision issued on June 29, 2023, the Kluge case will now be reexamined under the new undue hardship standard.

In Groff, the high court upended the longstanding standard requiring employers to show only that an accommodation of a religious belief or observance would impose more than “de minimis” effort or cost in order to constitute an undue hardship. The high court clarified that merely showing an undue hardship would impose a more than de minimis cost does not suffice to prove an undue hardship exists. Instead, the high court held that employers must now show a religious accommodation imposes a burden that is “substantial in the overall context of the employer’s business.”

The Court stated an employer must show “that the burden of granting an accommodation would result in substantial increased costs in relation to the conduct of its particular business.” Whether a substantial burden exists and can be defended may be reviewed based on “all relevant factors in the case at hand, including the particular accommodations at issue and their practical impact in light of the nature, size, and operating cost of an employer.” The district court will now apply the standard clarified in Groff to Kluge’s religious accommodation claim.

Sexual Orientation and Gender Identity Discrimination

The Kluge case also comes on the heels of the 2020 Supreme Court decision in Bostock v. Clayton County, Georgia, holding employment discrimination against gay and transgender individuals is a form of sex discrimination under Title VII. In that case, the Supreme Court stated “it is impossible to discriminate against a person for being homosexual or transgender without discriminating against that individual based on sex.”

Following Bostock, and in response to President Biden’s executive order directing federal agencies to enact rules specifically prohibiting sex discrimination based on sexual orientation and gender identity, the U.S. Equal Employment Opportunity Commission (EEOC) issued written guidance in June 2021 regarding pronoun usage. The EEOC warned “intentionally and repeatedly using the wrong name and pronouns to refer to a transgender employee could contribute to an unlawful hostile work environment” and could violate Title VII. This is not a new stance for the EEOC given its 2015 ruling in Lusardi v. Department of the Army—where the EEOC found that denying a transgender employee equal access to a restroom corresponding with their gender and repeatedly referring to them by incorrect gender pronouns may create a hostile work environment—and its previous consent decrees requiring employers to use employees’ correct pronouns.

Likewise, the U.S. Department of Education has issued a notice that it interprets Title IX’s prohibition of discrimination on the basis of sex to include discrimination based on both sexual orientation and gender identity. Litigation has ensued over both the EEOC and Education Department guidance, and the guidance from both agencies are currently enjoined and restrained from implementing against a number of states.

Further, in the Kluge case, the U.S. Department of Justice had filed an amicus brief agreeing that the school could not reasonably accommodate the teacher without undue hardship because it “caused transgender students in his classes significant distress and alienation.” The government stated that a finding of undue hardship was additionally supported by the school’s “increased risk of liability” under Title IX.

However, the Seventh Circuit’s April 2023 decision in Kluge declined to reach a conclusion on whether the school faced undue hardship because the last-names-only accommodation exposed the school to potential legal liability under Title IX. In a dissenting opinion, Judge Michael Brennan pointed out that while the Supreme Court has interpreted Title VII to prohibit discrimination due to an employee or applicant being transgender, “the Court has not held that the same construction of sex discrimination applies to Title IX.” As such, there is some question as to whether the school will ultimately cite the threat of Title IX lawsuits as creating an undue hardship.

Key Takeaways

Employers may want to track this evolving area of the law and this case for its legal implications. With the Seventh Circuit reviving Kluge’s religious accommodation claim, the parties and the district court will now reexamine whether the alleged harms to students and disruptions to the learning environment caused by accommodating the teacher’s religious beliefs rise to the level of undue hardship under Groff’s substantial burden standard. The court may permit additional discovery by the parties, and based on potential new facts and evidence, it remains to be seen how the religious accommodation claim will fare on remand. The court may still determine the harm to students and disruption to education process are sufficient even under the heightened substantial burden standard now necessary to show undue hardship.

Additional focus is likely as to whether the alleged harm from potential Title IX lawsuits is sufficient to support or bolster the school’s undue hardship defense, which the Seventh Circuit did not address. This could require an analysis of the open question as to whether Title IX, in fact, prohibits discrimination on the basis of being transgender.

As such, employers may want to note that gender identity and sexual orientation are protected categories under Title VII and numerous state and local laws, and therefore employers are required to treat gender identity and sexual orientation like all other visible and invisible protected characteristics, including in setting expectations and how comments and concerns are addressed.

Employers may also want to remain aware of state and local laws and guidance from antidiscrimination enforcement agencies on lawful use of applicants’ and employees’ pronouns, honorifics, and chosen names. For example, California requires employers to use an employee’s preferred gender, name, and/or pronoun, including gender-neutral pronouns, and the New York City Commission on Human Rights requires employers to use the name, pronouns, and title with which an employee self-identifies, regardless of the employee’s sex assigned at birth, anatomy, gender, medical history, appearance, or the sex indicated on the employee’s identification.

Also, given individuals can select a nonbinary or “X” gender marker on their U.S. passports and numerous states permit one to identify as a third or “X” gender on official state identification and birth certificates employers may wish to consider how they will collect and use such information, while remaining aware of intersecting rights such as the legal developments on religious accommodation.