Here in the Pacific Northwest, it is easy to miss that there has been a long brewing debate on whether discrimination in employment based on sexual orientation is unlawful. Oregon has specifically included sexual orientation and gender identity in its anti-discrimination laws since 2008. California and Washington also have state laws that specifically prohibit discrimination based on sexual orientation or gender identity.

But as LGBTQ rights have taken center stage in political and social discourse, understanding the federal landscape has become even more elusive. The debate has centered around the language of Title VII of the 1964 Civil Rights Act which does not explicitly protect employees from discrimination and harassment based on sexual orientation or gender identity. It does, however, protect employees from discrimination because of “sex.”

The issue of how Title VII’s prohibition against discrimination because of “sex” is defined under federal law was the topic of a landmark decision, Hively v. Ivy Tech Community College, issued  earlier this week in the Seventh Circuit (consisting of district courts in Illinois, Indiana, and Wisconsin). The Seventh Circuit held that discrimination based on sexual orientation is a prohibited form of sex discrimination under Title VII. This is the first time that a federal appeals court has reached that conclusion. Just last month, in Evans v. Georgia Regional Hospital, the Eleventh Circuit (consisting of district courts in Alabama, Florida, and Georgia) joined other circuits that have ruled the opposite way, holding that sexual orientation discrimination is not prohibited under Title VII.

Absent action from Congress to amend the language of Title VII to explicitly include protections against discrimination based on sexual orientation or gender identity, it has been left to the courts to interpret Title VII’s prohibition on the basis of “sex” to include, or not to include, protections based on sexual orientation or gender identity. The split in the Circuits--which leads to the nonsensical result that an LGBTQ employee in Indiana is protected from discrimination but an LGBTQ employee in Georgia is not—will likely lead the debate to the United States Supreme Court for resolution.

How did we get here?

Title VII is the federal law that prohibits discrimination in employment on the basis of sex, race, color, national origin, and religion. It generally applies to employers with 15 or more employees, including federal, state, and local governments. Notably, sexual orientation and gender identity are not on the list of classifications protected under Title VII.

Two United States Supreme Court decisions have provided some guidance on what discrimination “because of sex” includes. In Price Waterhouse v. Hopkins (1989), the Supreme Court first recognized that sex discrimination includes discrimination based on “sex stereotyping,” or a person’s perceived nonconformity with gender stereotypes. There, the Court held that a woman was a victim of sex discrimination when her employer denied her partnership in an accounting firm at least in part because she was insufficiently “feminine” in the way she dressed and conducted herself. That decision catalyzed sex-stereotyping theory as an independent cause of action under Title VII. The case did not address the issue of whether discrimination on the basis of sexual orientation, outside of the context of sex-stereotyping, was actionable.

In Oncale v. Sundowner Services (1998), the Supreme Court considered a claim of same-sex harassment. The Court held in a 9-0 decision that the “because of sex” requirement of Title VII could be met in at least three ways: (i) with evidence of the perpetrator’s homosexuality; (ii) with evidence that the perpetrator in fact targeted only members of one sex; or (iii) with evidence that the harassment took the form of gender-role policing—under the Price Waterhouse ruling—to punish an employee for failing to live up to traditional gender norms. Oncale has both reinforced the use of Price Waterhouse in sexual orientation claims and fueled separate claims for harassment rooted in homosexual desire or gender-targeted bullying.

Since Price Waterhouse and Oncale, a number of federal appeals and district courts have explicitly ruled that discrimination based on transgender status is a prohibited form of sex discrimination under Title VII and/or the Equal Protection Clause. The U.S. District Court for the District of Columbia in Schroer v. Billington upheld transgender employment rights in 2008, as did the Eleventh Circuit in Glenn v. Brumby in 2011. In Schroer, the court found discrimination on the basis of an individual’s intent to transition from one sex to another “was literally discrimination because of sex.” In Glenn, the Eleventh Circuit cited Price Waterhouse for the proposition that “discrimination on the basis of gender stereotype is sex-based discrimination,” and noted, “a person is defined as transgender precisely because of the perception that his or her behavior transgresses gender stereotypes.”

What should employers do in light of this uncertainty?

While the courts continue to struggle with the lack of clarity around Title VII’s language, the EEOC has made its position clear. Its website specifically states that “Discrimination against an individual because of gender identity, including transgender status, or because of sexual orientation is discrimination because of sex in violation of Title VII.”

The Seventh Circuit’s ruling reflects the ongoing push to expand the scope of Title VII to include sexual orientation discrimination and follows a continuing trend towards the illegality of discrimination on the basis of sexual orientation. The Supreme Court’s decision upholding same sex marriage in 2015 has been cited as reflecting that trend.

In light of the influx of rulings addressing this topic and the position taken by the EEOC, employers can expect to receive more charges of discrimination that include claims of sexual orientation discrimination and discrimination based on gender identity under Title VII.

We will continue to keep you updated as the latest cases make their way through the courts, and, likely, to the U.S. Supreme Court. As these cases wind through the judicial system, employers should take the following steps to protect from liability against discrimination on the basis of sexual orientation or gender identity:
 

1. ​Confirm whether any state or local fair employment laws may already explicitly prohibit discrimination based on sexual orientation or gender identity in your jurisdiction. At least 20 states and various other cities currently have legislative protections against sexual orientation and/or gender identity discrimination in employment in the public and private sector. Numerous other states without legislative protections have issued executive orders that expand protections for public employees.​
    
2. Employers should review policies, handbooks, and training materials to ensure that they do not discriminate on the basis of sexual orientation and gender identity. Specific policies that may be implicated include:​
    

• Equal Opportunity, Non-Discrimination, Harassment and Retaliation Policies
• Dress Code and Appearance Standard Policies
• Codes of Conduct
• Policies Regulating Gender Segregated Areas (Restrooms, Dressing and Locker Rooms, etc.)
• Benefits and Leave Policies
   

3. “Sexual orientation” and “gender identity” should be specifically included as classifications protected from discrimination or retaliation.
    
4. Employers should take care to inform employees that discrimination based on sexual orientation and gender expression is prohibited and should be reported and addressed.