& G.R. Harris Funeral Homes, Inc. for more than five years, but when she made a decision to come to work dressed as a woman instead of a man, the funeral home owner, Thomas Rost, fired her. Ms. Stephens had notified Mr. Rost she would be transitioning, but he chose to let her go, citing his religious beliefs.
The decision means transgender workers in Kentucky, Michigan, Ohio, and Tennessee-which make up the Sixth Circuit-don't have to provide additional evidence that the bias they allegedly faced was also based on illegal sex stereotyping or "gender nonconforming" behavior.
"Today's decision is an exciting and important victory for transgender people and allied communities across the country", John Knight, a senior staff attorney with the ACLU's LGBT & HIV Project, said in a statement.
The case, EEOC v. Harris Funeral Homes, began in 2013 when Harris Funeral Homes fired Stephens, who has worked there for six years, after she announced that she would transition.
"The significance of this decision is hard to overstate", said Lambda Legal lawyer Sharon McGowan in an email to BuzzFeed News.
The court also rejected the company's argument that it didn't violate Title VII because keeping Stephens on as an employee after she informed owner Thomas Rost that she would be transitioning from male to female in the workplace would have violated his sincerely held religious beliefs.
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The case has been remanded to district court where further proceedings will be consistent with the latest ruling.
But before she left for vacation, Rost said, "this is not going to work out" and offered a severance package if Stephens "agreed not to say or do anything", according to the case background.
"Religious freedom should never be used as a basis to discriminate against people and deny their basic human rights", Rachel Laser, the executive director of Americans United, said in a statement.
"So this ruling", he said, "affirms that that kind of firing is unlawful". The agency started the ball rolling on the reexamination by federal courts' of earlier rulings that rejected coverage for LGBT workers under the plain language of Title VII.
"The essential element of sex discrimination under Title VII is that employees of one sex must be treated worse than similarly situated employees of the other sex, and sexual orientation discrimination simply does not have that effect", the Justice Department argued in an amicus brief it filed in a sex discrimination case before the 2nd Circuit in July.
Federal courts have split on the question of whether discrimination against gay workers amounts to sex discrimination, and the Supreme Court declined to take up the issue past year. Other appeals courts have recently found that sexual orientation is also protected under Title VII.
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"An employer can not discriminate on the basis of transgender status without imposing its stereotypical notions of how sexual organs and gender identity ought to align", Moore writes.
The EEOC didn't immediately respond March 7 to Bloomberg Law's request for comment.
Joining in Moore in the decision is U.S. Circuit Judge Jeffrey White, an appointee of George W. Bush; and U.S. Circuit Judge Bernice Donald, an Obama appointee.
However, it erred "in finding that Stephens could not alternatively pursue a claim that she was discriminated against on the basis of her transgender and transitioning status", said the ruling.
She wrote the opinion against R.G.
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