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In what has roundly been hailed as a landmark decision, the Equal Employment Opportunity Commission (“EEOC”) held in Macy v. Bureau of Alcohol, Tobacco, Firearms and Explosives, EEOC Appeal No. 0120120821 (April 20, 2012) that, although no federal statute explicitly prohibits employment discrimination based on gender identity, transgender individuals may nonetheless state a claim for sex discrimination under Title VII.

The EEOC reasoned in Macy that Title VII does not solely include discrimination on the basis of a person’s sex, but also includes discrimination against a person who changes his or her sex.  Analogizing a decision not to hire an individual because she changed her sex with a decision not to hire someone because she changed her religion, the EEOC explained that no court would conclude that such “converts” fall outside of Title VII protection.  The EEOC explained, though, that its holding does not change that the central question when analyzing a sex discrimination claim remains “whether the employer actually relied on the employee’s gender in making its decision.”

In Macy, the Plaintiff claimed that the Bureau of Alcohol, Tobacco, Firearms and Explosives (“the Bureau”) denied her a position because she notified the Bureau during the background check process that she was transitioning from male to female.  Due to her status as a federal agency job applicant, Macy was required to follow federal EEOC internal complaint procedures and file her initial complaint with the Bureau, instead of directly with the EEOC.  In her complaint, Macy alleged (1) sex discrimination, (2) gender identity discrimination, and (3) sex stereotyping.  Without ruling on the merits, the Bureau determined that it would only adjudicate Macy’s sex discrimination claim under Title VII and the relevant EEOC regulations.  The Bureau further stated that it would accept Macy’s “gender identity stereotyping” claim, but that this claim was covered by Justice Department procedures, rather than EEOC jurisdiction, and thus would be processed outside of the EEOC’s standard Title VII adjudication process.  As a result, Macy would not be provided the same rights and remedies under Title VII and EEOC regulations with respect to her gender identity and sex stereotyping claims.

On appeal to the EEOC, Macy asserted that the Bureau’s decision to separate her gender identity and sex stereotyping claims from her sex discrimination claim was essentially a dismissal of her entire claim under Title VII.  Though the EEOC refrained from ruling on the merits of Macy’s claims, it held that her allegations of discrimination due to her status as a transgendered individual and gender identity were, in fact, viable sex discrimination claims under Title VII.  Accordingly, the EEOC found that the Bureau had improperly bifurcated Macy’s complaint into two distinct claims, and that Macy’s allegations were simply different manners of expressing a sex discrimination claim under Title VII.

In its decision, the EEOC substantially relied upon the Supreme Court’s reasoning in Price Waterhouse v. Hopkins, 490 U.S. 228, 251 (1989), which holds that Title VII bars “not just discrimination because of biological sex, but also gender stereotyping—failing to act and appear according to expectations defined by gender.”  Considering Price Waterhouse and its progeny, the EEOC determined that “although most courts have found protection for transgender people under Title VII under a theory of gender stereotyping, evidence of gender stereotyping is simply one way of proving sex discrimination.”  Moreover, the EEOC found that whether the alleged discrimination is motivated by “hostility, a desire to protect people of a certain gender, by assumptions that disadvantage men, by gender stereotypes, or by the desire to accommodate other people’s prejudices or discomfort,” all such behavior is evidence of sex discrimination in violation of Title VII.  Thus, the EEOC clarified that impermissible sex discrimination includes disparate treatment because: (i) an individual has expressed his or her gender in a non-stereotypical way; (ii) the employer is uncomfortable with the fact that the person has transitioned or is in process of transitioning from one gender to another; or (iii) the employer does not like that the person is identifying as a transgender individual.

In conclusion, Macy crystallizes the EEOC’s position that although an individual’s status as transgendered is not protected in and of itself, a transgender person may nonetheless establish a prima facie case of sex discrimination “through a number different formulations.”

Given Macy, employers should be aware that the EEOC will accept charges of discrimination based upon gender identity and/or an individual’s status as transgendered.  As a result, employers should be prepared to receive a greater number of these charges, and expect that the EEOC will look at any such charges closely.  In addition, though the EEOC’s decision is not binding on federal courts, employers should be aware that allegations of transgender discrimination may expose them to liability under Title VII.