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Few areas of the law are evolving as rapidly as the law surrounding LGBTQ rights. Neither federal employment statutes nor Texas state employment statutes explicitly recognize sexual orientation or gender identity as classifications protected from discrimination (although local ordinances in certain cities, such as Austin and Dallas, may provide more protection for employees than federal or state laws). These statutes do, however, prohibit discrimination “because of sex.” The question being analyzed by courts across the country is whether “sex” should be interpreted to include sexual orientation and gender identity.

On March 7, the U.S. Court of Appeals for the Sixth Circuit ruled that terminating an employee because of her transgender status violated Title VII of the Civil Rights Act of 1964 (the federal law that prohibits discrimination “because of sex”). The case, EEOC v. R.G. & G.R. Harris Funeral Homes, involved a woman named Aimee Stephens, who worked as a funeral home director in Michigan. Stephens was born biologically male and had lived and presented as a male during her six years of employment with the funeral home. In July 2013, Stephens informed Thomas Rost, the funeral home owner, that she was a transgender woman, that she intended to transition from male to female, and that, moving forward, she planned to represent herself and dress as a woman at work. Within two weeks, Rost fired Stephens. He testified that he fired her because she was no longer going to represent herself as a man and intended to dress as a woman. He based the decision on his religious beliefs.

The EEOC sued the funeral home for violating Title VII. On appeal, the Sixth Circuit found that the funeral home had engaged in unlawful discrimination on the basis of sex, and rejected the funeral home's defense that applying Title VII's proscriptions to the matter at hand would substantially burden Rost's religious exercise. In reaching its decision, the Sixth Circuit relied on long-standing U.S. Supreme Court precedent that discrimination “because of sex” includes sex stereotyping based on a person's gender nonconforming behavior. But the Sixth Circuit took its holding a step further, finding that “discrimination on the basis of transgender and transitioning status violates Title VII,” and that “it is analytically impossible to fire an employee based on that employee's status as a transgender person without being motivated, at least in part, by the employee's sex.”

The Sixth Circuit's decision in Stephens came on the heels of critical decisions by the Seventh and Second Circuit Courts of Appeals, both of which applied similar analyses to conclude that Title VII prohibits discrimination on the basis of sexual orientation (Hively v. Ivy Tech Community College and Zarda v. Altitude Express, respectively). The Eleventh Circuit Court of Appeals reached a contrary conclusion in March 2017 (in Evans v. Georgia Regional Hospital), and the Eighth Circuit Court of Appeals is considering the same issue now (in Horton v. Midwest Geriatric Management). The employers in both the Stephens and Zarda cases have petitioned the U.S. Supreme Court for review.

The Fifth Circuit Court of Appeals, the circuit in which Texas sits, has not directly addressed these issues. In Blum v. Gulf Oil, a 1979 decision, the Fifth Circuit stated, without explanation, that “discharge for homosexuality is not prohibited by Title VII.” However, the Blum case was decided on the issue of pretext, and some have argued that the Fifth Circuit's statement regarding Title VII's coverage was dicta. Moreover, in 2013, the Fifth Circuit recognized in EEOC v. Boh Brothers Construction that Title VII prohibits discrimination based on sex stereotyping. It remains to be seen how the Fifth Circuit would decide some of these issues today.

But on April 4, a federal court in Texas made a groundbreaking ruling in the area of LGBTQ rights. In Wittmer v. Phillips 66, Judge Lee Rosenthal of the U.S. District Court for the Southern District of Texas held that Title VII prohibits discrimination on the basis of gender identity. Rosenthal ultimately ruled that the plaintiff, a transgender job applicant, was not a victim of discrimination under the particular facts presented. But her initial finding—that discrimination “because of sex” includes discrimination on the basis of gender identity—is significant. Rosenthal acknowledged that the Fifth Circuit has not yet addressed the issue, but found the recent decisions by the Second, Sixth and Seventh circuits (described above) to be “persuasive.” Rosenthal's decision is the first of its kind in Texas.

To add another layer to this issue, on Oct. 6, the U.S. Pastor Council, a Texas-based coalition of conservative churches, sued the EEOC and the city of Austin claiming that Title VII and Austin's employment discrimination ordinance (respectively) violate the U.S. Constitution and state and federal religious freedom laws by forcing religious employers to hire gay and transgender workers. Similar to the funeral home owner in Stephens, the U.S. Pastor Council is effectively seeking an exception to the proscriptions contained in Title VII and Austin's anti-discrimination ordinance based on the religious beliefs of its members.

The U.S. Department of Justice has taken the position, on several recent occasions, that Title VII does not prohibit sexual orientation and gender identity discrimination. Just last week, the DOJ filed a brief in the Stephens case siding with the funeral home on the definition of “sex” in the context of Title VII. The DOJ's brief came just days after a report in The New York Times about a draft U.S. Department of Health and Human Services regulation that would define “sex” as fixed at birth. The EEOC, on the other hand, has listed “[p]rotecting [LGBT] people from discrimination based on sex” as one of its strategic priorities for the coming five years. A split like this one between the different agencies within the executive branch on a hot-button legal issue is rare. Given the “patchwork” state of the law, consideration of these issues by the Fifth Circuit or the U.S. Supreme Court in the near future seems almost certain.

Devon Sharp is a shareholder in the Dallas office of Munsch Hardt. Her practice focuses on employment law and business litigation.