North Carolina Bathroom Battle May Turn on Deference to Agency

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By Jay-Anne Casuga

May 24 — Whether North Carolina can keep transgender state workers from using public restrooms based on their sex at birth may turn on the level of deference courts give to the EEOC's interpretation of federal civil rights law, attorneys and law professors told Bloomberg BNA.

“It's a flip of the coin in terms of how much agency deference will be afforded in this case,” said Erika K. Wilson, an assistant professor of law at the University of North Carolina School of Law, referring to dueling lawsuits filed by the Justice Department and North Carolina over H.B. 2, also known as the Public Facilities Privacy & Security Act.

Title VII of the 1964 Civil Rights Act, which is enforced by the Equal Employment Opportunity Commission, bars public and private employers from discriminating against employees and applicants based on sex and other protected categories. It contains no express prohibitions against gender identity bias.

But in recent years, the EEOC has taken the position that sex discrimination under Title VII encompasses transgender bias.

Professors and attorneys explained to Bloomberg BNA that courts don't apply a particularly high standard of deference to the EEOC's substantive interpretations of Title VII, and at times have declined to follow the agency's positions.

However, they predicted that even if courts don't defer to the EEOC's interpretation about sex bias, courts still will consider the agency's view in reaching their own conclusions regarding Title VII's protections.

Additionally, they said courts likely will consider federal court precedent in favor of transgender employees who brought sex-stereotyping claims under Title VII.

Law Introduced, Enacted on Same Day

North Carolina enacted H.B. 2 in response to an ordinance issued by the city of Charlotte that prohibited public contractors from discriminating against workers based on sexual orientation and gender identity (35 DLR A-6, 2/23/16). The ordinance also allowed transgender people to use restrooms that correspond with their gender identity.

H.B. 2, introduced in the North Carolina Legislature during a special session, was signed by Gov. Pat McCrory (R) and went into effect, all on March 23.

It bars localities from requiring private employers or contractors from paying wages, providing benefits or extending discrimination protections not mandated by the state (57 DLR A-9, 3/24/16).

Additionally, the law requires people to use restrooms in public buildings that correspond with the biological sex stated on their birth certificates.

DOJ, State Filed Lawsuits

Following the state law's enactment, the Justice Department May 4 sent a letter to McCrory stating that H.B. 2 facially discriminates against transgender state employees on the basis of sex in violation of Title VII (86 DLR AA-1, 5/4/16).

McCrory responded by filing a lawsuit in the U.S. District Court for the Eastern District of North Carolina, seeking a declaration that H.B. 2 doesn't violate Title VII ( McCrory v. United States, E.D.N.C., No. 16-00238, complaint filed 5/9/16 ) (89 DLR AA-1, 5/9/16).

The Justice Department filed its own suit the same day, arguing that North Carolina's law violates Title VII and two other federal laws ( United States v. North Carolina, M.D.N.C., No. 16-00425, complaint filed 5/9/16 ).

 

Title IX Case May Have Impact on H.B. 2 Suits

In April, a split U.S. Court of Appeals for the Fourth Circuit panel held that a Virginia high school engaged in sex discrimination under Title IX of the 1974 Education Amendments when it prohibited a transgender male student from using male restrooms ( G.G. v. Gloucester Cty. Sch. Bd., 2016 BL 123552 (4th Cir. 2016)).

The Fourth Circuit majority relied on an opinion letter issued by the Department of Education's Office for Civil Rights stating that Title IX protects transgender students. The court also observed that it looks to case law interpreting Title VII of the 1964 Civil Rights Act for guidance in evaluating Title IX claims.

Both the U.S. District Court for the Middle District of North Carolina and the U.S. District Court for the Eastern District of North Carolina—where the federal government and the state respectively filed their H.B. 2 lawsuits—are governed by Fourth Circuit precedent.

The district courts would be bound by the Fourth Circuit's Gloucester ruling in the Title IX context, but not for Title VII, said Erika K. Wilson, an assistant professor of law at the University of North Carolina School of Law.

However, she said the case might be helpful in the sense that the courts could analogize to language in Title IX as they attempt to interpret whether sex discrimination under Title VII also include transgender bias.

Katharine T. Bartlett, a law professor and former dean of Duke University School of Law, said if the North Carolina case reaches the Fourth Circuit, it would be “inconceivable” to her that the appeals court would decide that transgender bias is sex discrimination under Title IX, but not under Title VII.

“There would be no reason to interpret the two nondiscrimination statutes differently,” she said.

But Bartlett pointed out the possibility that, if the H.B. 2 case reaches the Fourth Circuit, a different three-judge panel could disagree with the Gloucester panel.

“I would think, presumably, that the Fourth Circuit would be prevailed upon to convene en banc,” she said.

Are Transgender Workers Protected? EEOC Says Yes

Title VII, which bars employers from discriminating against employees and applicants based on sex and other protected statuses, contains no express prohibitions against gender identity bias.

In April 2012, the EEOC, which enforces Title VII, held for the first time in Macy v. Holder, EEOC, No. 0120120821, 4/26/12 , that a transgender federal employee denied a position raised a cognizable sex bias claim under Title VII (80 DLR A-4, 4/25/12).

Following Macy, other federal agencies, including the DOJ and the Labor Department, adopted the EEOC's position that sex discrimination under Title VII includes bias based on transgender status (236 DLR A-2, 12/9/14); (243 DLR A-1, 12/18/14).

In its complaint against the federal government, North Carolina argued that the EEOC's interpretation shouldn't be afforded judicial deference, calling it a “baseless and blatant overreach.”

It contended that Congress must amend Title VII to include new protected categories such as gender identity.

Levels of Deference to Agencies

Generally, courts apply one of three standards when deciding whether to defer to an agency's interpretation of a law:

 

  • Chevron deference is the highest level of deference and is granted to an agency's interpretations if the law's language is ambiguous, the agency has congressional authority to issue regulations interpreting the law and the interpretation is reasonable;
  • Auer deference may be granted to agencies for interpretations of their own ambiguous regulations; and
  • Skidmore deference, the least deferential standard, applies to an agency's sub-regulatory guidance, such as enforcement and policy guidances, as well as agency decisions that are not binding on courts.

 

Skidmore allows courts to consider the thoroughness of the agency's interpretation and the validity of its reasoning, as well as its “consistency with earlier and later pronouncements, and all those factors which give it power to persuade.”

Deference to EEOC? Difficult to Predict

Wilson of UNC explained that Title VII expressly grants the EEOC authority to issue procedural regulations, but not substantive rules interpreting the law.

Nevertheless, the EEOC has issued substantive, sub-regulatory guidance regarding Title VII.

Wilson told Bloomberg BNA May 11 that, in general, courts afford some level of judicial deference to those EEOC interpretations. However, she said courts tend to split approximately 50/50 in terms of how often they side with the EEOC.

Carolyn Wheeler, senior counsel with Katz, Marshall & Banks in Washington, May 16 said the court tasked with resolving whether H.B. 2 violates Title VII potentially could apply Skidmore deference to the EEOC's interpretation of sex discrimination as including transgender bias, but it might not.

“Courts tend to defer to agencies if they agree with them,” said Wheeler, who previously served as assistant general counsel in the EEOC’s Office of General Counsel, Appellate Services Division, as well as the agency's acting associate general counsel. “If they don't agree, they don't defer.”

As an example, Wheeler pointed to the Supreme Court's ruling in Young v. United Parcel Service, Inc., 135 S. Ct. 1338, 126 FEP Cases 765 (2015), in which the justices 6-3 rejected the EEOC's interpretation of Title VII as amended by the Pregnancy Discrimination Act (57 DLR AA-1, 3/25/15).

The court majority found that no deference was owed to the EEOC's enforcement guidance interpreting the PDA because the circumstances under which the agency issued guidance “severely limit[ed]” its “special power to persuade.”

It observed that the EEOC promulgated the 2014 guidelines only after the court granted certiorari in Young, and that the guidelines took “a position about which the EEOC's previous guidelines were silent” and was “inconsistent with positions for which the [federal] government ha[d] long advocated.”

Wheeler observed that none of the factors cited by the Supreme Court in Young for declining to adopt the EEOC's interpretation exist in the H.B. 2 dispute.

“So there is good reason to expect the courts to defer to the EEOC’s interpretation of the meaning of ‘sex' in Title VII,” Wheeler said.

Apart from Young, the high court in recent years also has declined to adopt the EEOC's Title VII interpretations in Vance v. Ball State University, 133 S. Ct. 2434, 118 FEP Cases 1481 (2013) (121 DLR AA-1, 6/24/13), which concerned the definition of “supervisor,” and Nassar v. University of Texas Southwest Medical Center, 674 F.3d 448, 114 FEP Cases 986 (5th Cir. 2012) (49 DLR A-4, 3/13/12), which rejected the use of a “motivating factor” standard in retaliation cases.

Some examples of when the Supreme Court has adopted the EEOC's Title VII interpretations are Crawford v. Metropolitan Gov't of Nashville and Davidson County, 555 U.S. 271, 105 FEP Cases 353 (2009) (15 DLR AA-1, 1/27/09), and Burlington Northern & Santa Fe Railroad Co. v. White, 548 U.S. 53, 98 FEP Cases 385 (2006) (121 DLR AA-1, 6/23/06). Both cases dealt with retaliation claims.

EEOC Interpretation Will Be Considered

Katharine T. Bartlett, a law professor and former dean of Duke University School of Law, told Bloomberg BNA May 16 that the Supreme Court “has never been very clear about exactly how much deference is due” to the EEOC's substantive interpretations of Title VII.

But given that the deference standard isn't particularly high in EEOC cases, Bartlett predicted that the court deciding the H.B. 2 dispute will take into account the EEOC interpretation in reaching its own conclusion regarding Title VII's protections.

She observed that in the 1980s, hostile environment sexual harassment wasn't recognized as a form of sex discrimination under Title VII.

That changed when the Supreme Court held in Meritor Savings Bank v. Vinson, 477 U.S. 57, 40 FEP Cases 1822 (1986), that sex discrimination under Title VII included sexual harassment.

In that case, Bartlett said, the EEOC's reasoning “was very influential and eventually prevailed.”

Likewise, the EEOC's interpretation that transgender discrimination is a form of sex discrimination “should be influential,” she said.

“Because the EEOC has thought about this issue more than most courts and has some enforcement responsibility for Title VII, its interpretation of the statute will be considered but it's not dispositive,” Bartlett said.

Deference Not Necessarily Needed

Michelle E. Phillips, a management attorney with Jackson Lewis in White Plains, N.Y., told Bloomberg BNA May 16 that the lawsuits over H.B. 2 won't hinge solely on whether courts defer to the EEOC's interpretation of Title VII.

Phillips said there have been cases in which transgender employees have had success in bringing Title VII sex discrimination claims under the sex-stereotyping theory recognized by the Supreme Court in Price Waterhouse v. Hopkins, 490 U.S. 228, 49 FEP Cases 954 (1988).

In that case, the high court held that Title VII prohibits employers from discriminating against employees who don't conform to gender stereotypes. The EEOC also relied on Price Waterhouse in deciding Macy v. Holder.

Since then, Phillips said, the Sixth and Eleventh circuits have upheld sex-stereotyping claims brought by transgender employees in Smith v. Salem, 378 F.3d 566, 94 FEP Cases 273 (6th Cir. 2004) (106 DLR A-1, 6/3/04), and Glenn v. Brumby, 663 F.3d 1312, 113 FEP Cases 1543 (11th Cir. 2011) (234 DLR A-4, 12/6/11).

Wheeler of Katz, Marshall & Banks also pointed to the U.S. District Court for the District of Columbia's ruling in Schroer v. Billington, 577 F.Supp.2d 293, 104 FEP Cases 628 (D.D.C. 2008) (184 DLR AA-1, 9/23/08), in which a judge held that discrimination against an employee who was transitioning from male to female was Title VII sex discrimination under both a sex-stereotyping theory and the law's plain language.

To contact the reporter on this story: Jay-Anne Casuga in Washington at jcasuga@bna.com .

To contact the editor responsible for this story: Susan J. McGolrick at smcgolrick@bna.com .