By Heather Wydra, Esq.
Members of the lesbian, gay, bisexual and transgender (LGBT) community are valued employees in our workforce. Studies show, however, that LGBT workers experience discrimination and harassment on the job at significantly higher rates than their heterosexual colleagues.1 Twenty-one states and the District of Columbia (DC) have passed laws that prohibit employment discrimination based on sexual orientation, and 18 states and DC prohibit discrimination based on gender identity. As noted in our article entitled "What's in Your Employee Handbook" (EPS Newsletter November 2013), employers in states with LGBT anti-discrimination laws should include protections for LGBT workers in their employee handbooks and EEO policies. Given recent trends in federal law, however, it would be prudent for all employers to include sexual orientation and gender identity as protected characteristics.
Title VII of the Civil Rights Act is the federal law that prohibits discrimination against employees "because of sex," among other things.2 While this law does not specifically identify sexual orientation or gender identity as protected characteristics, the EEOC and several federal courts have extended Title VII's reach to include one or both of these categories. In 2012, the EEOC issued a landmark decision, Macy v. Holder,3 holding that discrimination against someone because they are transgender is discrimination "because of sex," in violation of Title VII. Therefore, transgender employees who file charges of discrimination with the EEOC based on their gender identity or expression will be allowed to pursue those claims. The Macy decision is binding on federal agencies and will be persuasive to federal courts. In fact, even prior to Macy, several federal courts interpreted Title VII (or laws with similar language banning discrimination because of sex) to prohibit discrimination based on gender identity.4 Therefore, it is in the best interest of all employers to maintain a policy prohibiting discrimination against transgender employees.
In some jurisdictions, Title VII may cover discrimination on the basis of sexual orientation, too. On March 31, 2014, a federal judge in DC refused to dismiss a Title VII complaint filed by an employee who alleged that he had been passed over for promotions and suffered a hostile environment because, as a gay man, he failed to conform to male sex stereotypes. Terveer v. Billington, Civil Action No. 12-1290 (CKK) (D.D.C. March 31, 2014).
Employers should bear in mind that discrimination in employment includes discrimination in the provision of fringe benefits. Employer-sponsored health plans that exclude coverage for transgender-related care, such as surgical procedures for transitioning gender, may face exposure under state and federal employment discrimination laws. In addition, state insurance law can affect the health benefits an employer is allowed to offer to its employees. For example, in DC, health insurance policies, including insured employer-sponsored health benefit plans, cannot exclude from coverage medically necessary gender transitioning procedures, including surgery.5 California, Oregon, Vermont, Colorado, and Connecticut have similar policies.6
The Affordable Care Act (ACA) also has an impact on the benefits an employer offers to its employees. Section 1557 of the ACA is the first federal law to prohibit discrimination on the basis of sex in healthcare.7 Section 1557 applies to insurance companies receiving federal funds, including those insuring and/or administering health benefit plans for employers. It remains to be seen whether Section 1557 will be interpreted to encompass discrimination based on gender identity or sexual orientation. Given recent trends, however, health insurance companies undoubtedly will be reevaluating their policies for potential conflicts with both evolving state insurance law and Section 1557. A recent sign of these trends is the federal government's announcement on June 14, 2014, to all Federal Employee Health Benefits (FEHB) carriers that as of the 2015 benefit year, it will no longer require those carriers to exclude transgender-related care from coverage.8
In summary, while the ultimate reach of Title VII will vary by jurisdiction, to be sure to avoid legal exposure under this law, all employers should consider expressly prohibiting discrimination based on sexual orientation and gender identity in their employee handbooks and EEO policies. The vast majority of top 50 federal contractors and Fortune 500 companies already do so.9 Notably, President Obama has indicated that he intends to sign an Executive Order prohibiting federal contractors from discriminating against employees on the basis of sexual orientation or gender identity.10 In addition to prohibiting discrimination against LGBT workers, employers also should evaluate the fringe benefits being offered to employees to determine whether those benefits, such as health insurance, contain transgender exclusions that may be considered discriminatory or that are no longer permissible in their jurisdiction.