The Public Facilities Privacy & Security Act, commonly known as HB2, continues to generate controversy and confusion. The new law has caused many employers to reexamine their policies with regard to restroom use by employees and third parties using their facilities. Even absent a current situation involving a transgender person, employers may want to consider in advance their response to various situations.

HB2 does not regulate private business’ restroom use policies. Companies are free under state law to adopt policies that match their business expectations. However, federal law may impact these policies, at least with respect to employee restroom use. The Equal Employment Opportunity Commission has taken the administrative position that transgender status is protected under Title VII. The EEOC has recently sued several employers accused of taking adverse employment action involving transgender employees or applicants.

The EEOC has not directly expressed an opinion in litigation as to whether refusal to allow an employee to use a restroom consistent with his or her gender identity would violate its interpretation of Title VII, although in January the Commission settled a case where this was one of the employee’s complaints. The Department of Labor currently interprets Executive Order 11246 to prohibit federal contractors from barring transgender employees the use of restrooms consistent with their gender identity. Based on these positions, employers can assume that the EEOC will consider refusal to allow employees to use restroom facilities consistent with their gender identity to be a violation of Title VII.

Tuesday’s decision by the Fourth Circuit Court of Appeals (which includes North Carolina and South Carolina) in G.G. v. Gloucester County School Board may reflect the court’s position on the ability of federal agencies to extend their protections to transgender persons. That case did not involve employment, but was a challenge to a public school’s ban on transgender students using restrooms consistent with gender identity. The plaintiff alleged that this policy violates Title IX, which applies to educational institutions that receive federal support. The Fourth Circuit decided 2-1 that the Department of Education has the authority under Title IX to define gender to include transgender students.

This same reasoning could be applied to Title VII. If the Fourth Circuit defers to the EEOC’s definition of gender discrimination, it would prohibit employers from discriminating against transgender persons, including restroom use prohibitions. The case may be appealed to the full Fourth Circuit and/or Supreme Court, but its holding appears inconsistent with portions of HB2 that apply to public educational institutions.

Last June, the federal Occupational Safety and Health Administration issued a Guide to Restroom Access for Transgender Workers. OSHA regulations (49 C.F.R. §1910.141) require that employers provide employees with sanitary restroom facilities. The Guide states that failure to allow an employee access to a restroom facility consistent with his or her gender identity could lead transgender employees to refuse to use restrooms while at work, creating possible health problems. OSHA applied this reasoning to policies that would require use of restrooms based on biological sex, or mandatory use of designated gender-neutral restrooms. Although to date OSHA has not cited employers on this basis, the Guide expresses the agency’s position on the legal reasoning for such citations.

How are employers responding to these legal changes? For facilities that have single-user restrooms, some employers have designated these areas as gender neutral. Other employers have reconfigured locker rooms and similar areas to provide for lockable single-occupant stalls. If questioned by a transgender employee or third person, the employer can discuss the person’s needs and preferences, along with the employer’s policies and expectations. These policies can be reduced to written rules that among other things, prohibit inappropriate or disruptive conduct of any kind in restroom facilities.

This area of the law will continue to develop in the coming years, and employers should monitor these changes to make sure their practices comply with applicable law.