We typically think of sex discrimination and sexual harassment as involving two employees of the opposite sex, but that unlawful activity can occur between employees of the same sex, too. Although federal law doesn’t explicitly recognize gender identity or sexual orientation as protected characteristics, several states and cities have passed ordinances prohibiting adverse action on the basis of gender identity and sexual orientation. Additionally, in its 2013-16 Strategic Enforcement Plan, the Equal Employment Opportunity Commission (EEOC) emphasized the emerging issue of LGBT rights in the workplace. 
A brief overview of the law
The EEOC—and several courts—have said that discrimination based on gender identity, change of sex, or transgender status (also known as gender identity discrimination) is discrimination because of sex and is therefore prohibited by federal law. The EEOC has instructed its investigators to counsel gay and lesbian employees who believe they have been discriminated against because of their sexual orientation that they have a right to file a complaint. These claims typically (and most successfully) are filed with the EEOC’s or a private attorney’s assistance, and the discrimination is characterized as unlawful stereotyping.
Even though such cases have had only limited success, courts have recognized the sex stereotyping theory in other cases not involving homosexuals (e.g., in cases involving transgender individuals), and it’s only a matter of time before a court recognizes the theory in a case filed by a homosexual employee. For this reason, you must be mindful of making comments based on stereotypes to homosexual or transgender employees in the workplace.
Examples of sex stereotyping
Sex stereotyping occurs when an individual doesn’t conform to traditional gender stereotypes for his or her biological sex. The theory can apply when a person is neither transgender nor homosexual. Examples of real-life comments or conduct in the workplace that may constitute evidence of sex stereotyping include:
- Comments that a female manager is “macho,” in need of “a course at charm school,” and should “walk more femininely, talk more femininely, dress more femininely, wear makeup, have her hair styled, and wear jewelry”;
- Comments that a firefighter who was born male but subsequently came to identify as female wasn’t “masculine enough” after he began to “express a more feminine appearance at work”;
- Comments that a female employee with small children has “too much on her plate” or “would not show the same level of commitment . . . because she had little ones at home”;
- Comments that a female employee who avoids makeup, wears her hair short, and prefers loose-fitting clothes like men’s button-down shirts and slacks lacks “prettiness,” lacks the “Midwestern girl look,” and has “an Ellen DeGeneres kind of look”; and
- Comments that a male police officer who was living as a preoperative male-to-female transsexual didn’t appear to be “masculine” and needed to stop wearing makeup and act more masculine before his promotion to police sergeant.
Treating transgender employees appropriately
An employee who is transgender can create unique concerns in the workplace. Coworkers may not have interacted with many (or any) transgender individuals previously and may be uncertain about how to refer to the employee. You are best advised to refer to transgender employees as the gender they present. So if an employee who was born male presents himself as a female and requests that you refer to him as a woman, you and your employees should comply with that request. The same is true if an employee who was born female presents herself as male and requests to be referred to as a man.
Although federal law doesn’t explicitly identify being transgender as a protected status, the EEOC and the federal courts have recognized it as a protected status. Discrimination or harassment based on transgender status is recognized as sex stereotyping, which federal law prohibits as part of its ban on sex discrimination.
Additionally, although Indiana’s Civil Rights Law doesn’t explicitly include being transgender as a protected status, state courts may extend protection to transgender individuals under the same theory federal courts have used. Moreover, cities such as Indianapolis and South Bend have passed ordinances recognizing gender identity as a protected status. For this reason, if an employee presents to you, your employees, and your customers as female and requests to be referred to as a woman, then you and your employees should comply with the employee’s request irrespective of her biological gender. The same is true if an employee holds himself out as male and requests to be referred to as a man.
But you can require employees to comply with such a request from a transgender coworker? Generally, yes. What if an employee refuses, claiming he can’t or doesn’t want to “lie” about the coworker’s gender? You should explain your position to the employee, saying something like, “We do not believe that we are asking you to lie. But if you believe that referring to your coworker as a woman is a lie, then that’s a personal conflict you must resolve. When you are in the workplace, on work time, or at a work function, however, you must refer to your coworker by the gender she has requested.” You also should warn the employee about the possibility of discipline if he continues to go against the coworker’s wishes and ignore your explicit directions.
Bottom line
Treat issues involving employees who are transgender the same way you would deal with issues involving any other employees, and respond to same-sex discrimination or harassment of any degree or frequency just as 
seriously as you would respond to such problems involving opposite-sex employees. Good manners and common sense—as well as the law—dictate as much.
Amanda Shelby is an attorney with Faegre Baker Daniels LLP in Indianapolis, Indiana. If you have questions about this issue, contact the author at amanda.shelby@faegrebd.com .