Although the case law remains mixed, a majority of circuit courts now also recognize that it is possible for LGBTQ employees to raise a viable claim of sex stereotyping under the Supreme Court's decision in Price Waterhouse v. Hopkins (1989) if they do not conform to preconceived notions of gender. The EEOC adopted this broader reading of sex-based discrimination, building upon its landmark decision in Macy v. Holder (EEOC 2012), in which it upheld the Title VII sex discrimination claims of a transgender employee, with its recent decision in Baldwin, which adopted a similarly expansive reading of Title VII as to sexual orientation discrimination. In Baldwin, the Commission held that besides a sex-stereotyping theory, a gay employee could also be discriminated against "because of" his sex when his employer takes adverse action because he is not in a relationship with someone of the opposite sex.

Three years ago, the EEOC issued an opinion which held, for the first time, that discrimination against transgender persons based on gender identity is impermissible sex discrimination under Title VII of the Civil Rights Act of 1964. See Macy v. Holder (Apr. 20, 2012). Last month, the EEOC revisited discrimination against transgender persons and released a decision that sheds some light on how the practical applications of this finding may affect employers, holding that certain bathroom restrictions for a transgender employee constituted discrimination.

On June 30, 2014, the DOL’s Secretary announced that: “DOL is updating its enforcement protocols and nondiscrimination guidance to clarify that DOL provides the full protection of the federal nondiscrimination laws that it enforces to individuals on the bases of gender identity and transgender status.” The directive also cites as support the EEOC’s decision in Macy v. Holder, 2012 WL 1435995, in which the EEOC unanimously concluded that discrimination because a person is transgender is sex discrimination in violation of Title VII. In Macy, the EEOC determined that discrimination against a transgender employee can be a form of “sex stereotyping.”

Despite the lack of explicit federal protection, the EEOC has consistently found that transgender discrimination and harassment is sex discrimination and, therefore, covered by Title VII. The seminal case is Macy v. Holder, 2012 WL 1435995 (EEOC April 20, 2012), where the EEOC ruled that claims of gender identity discrimination are a form of sex discrimination. The rule arose from a complaint brought by the Transgender Law Center on behalf of Mia Macy, a transgender woman, against the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF).