While employers always need to keep in mind differing obligations under state and federal antidiscrimination statutes, the potential pitfalls for employers with regard to transgender employees are enormous. Courts have expressly held that Title VII and the Equal Protection Clause does not cover discrimination on the basis of sexual orientation. See, e.g., Simonton v. Runyon, 232 F.3d 33, 36 (2d Cir. 2000). However, most courts that have considered the question of transgender—or gender nonconforming individuals, regardless of how they self-identify—have held that the gender-stereotyping theory of Price Waterhouse v. Hopkins, 490 U.S. 228 (1989), extends Title VII protections to those individuals.

The extension of Title VII protection to transgender or gender nonconforming individuals has been addressed by a number of courts, which employers should note. See, e.g., Glenn v. Brumby, 663 F.3d 1312, 1313-14 (11th Cir. 2011) (accepting a claim bought by a transgender plaintiff who was fired because her supervisor believed that her gender transition would be “inappropriate” and “disruptive” and would make fellow employees “uncomfortable”); Smith v. City of Salem, 378 F.3d 566 (6th Cir. 2004) (accepting a claim by a transgender woman who was told she was not masculine enough and was subjected to psychological testing and suspension); Schwenk v. Hartford, 204 F.3d 1187 (9th Cir. 2000) (accepting a claim under the Equal Protection Clause that a prison guard assaulted a transgender prisoner based on assumptions about gender); Rosa v. Park West Bank & Trust Co., 214 F.3d 213 (1st Cir. 2000) (accepting a claim from a bank patron who was refused service because his gender presentation did not match his identification); Schroer v. Billington, 577 F. Supp. 2d 293, 300, 305 (D.D.C. 2008) (accepting a claim brought by a transgender plaintiff whose supervisor recoiled when shown a picture of what the employee would look like after transitioning).

Jurisprudence and Dress Codes

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