In 1964, Congress passed the Civil Rights Act. Title VII of the Civil Rights Act outlawed major forms of discrimination, including discrimination based on race, national origin, religion, and sex. At the time, sex discrimination meant discrimination against women. Today, however, courts are grappling with the boundaries of sex discrimination under Title VII: does it include sexual orientation discrimination? Gender identity discrimination?

Reasoning that “sex” refers to biological characteristics, the majority of courts considering these issues have held that discrimination based on sexual orientation or gender identity does not violate Title VII.

In the landmark case Price Waterhouse v. Hopkins, however, the U.S. Supreme Court held that discriminating against someone because he or she does not fit classic sexual stereotypes—such as a woman who does not wear jewelry or makeup—violates Title VII. Consequently, following Price Waterhouse, some courts have held that gay or transgender employees may prevail on a claim of sex discrimination under Title VII if they can prove discrimination based on “gender non-conformity.”

Recently, the EEOC held that “sex,” as that term is used in Title VII, prohibits discrimination against transgender employees. While this decision involved a federal employer and is therefore directly binding on federal agencies only, private employers can expect the EEOC to follow this position in charges filed by employees in the private sector.

As a result of this ruling, employers should rethink any policies requiring sexually stereotypical dress (for example, requiring women to wear skirts and men to wear a suit and tie). Employers may also need to examine their policies surrounding single-sex restroom facilities.