Capell & Howard P.C. Attorneys At Law Montgomery & Auburn/Opelika, AL

The Only Constant Is Change

July 3, 2020

The Only Constant Is Change

The Supreme Court’s Recent Interpretation of Title VII Changes the HR Landscape

The Supreme Court’s decision in Bostock v. Clayton Cty., Ga., No. 17-1618 (U.S. June 15, 2020)) granted federal protections against workplace sex discrimination based on gender identity and sexual orientation under Title VII of the 1964 Civil Rights Act (CRA). This ground-breaking ruling will have an immediate impact on human resource policies and employee benefits. While Title VII governs day-to-day workplace issues like hiring, firing, compensation, promotions and harassment, Bostock also implicates the Health and Human Services (HHS) Final Rule on the Affordable Care Act (ACA) that it published on June 12, 2020.

Impact on Employer-Sponsored Health Plans and Benefits

While Bostock’s ruling is about wrongful employment termination, the decision has implications for employer-sponsored health plans and other benefits. Discrimination on the basis of sex in employment, including benefits, has been prohibited for over 55 years by Title VII. In 1978, the Pregnancy Discrimination Act (PDA) amended Title VII to include pregnancy discrimination as prohibited sex discrimination. As a result, employer-sponsored health plans must cover pregnancy, childbirth and related medical conditions in the same way and to the same extent as other medical conditions that are not gender specific. The Supreme Court has also ruled that Title VII requires an employer-sponsored group health plan to extend equally comprehensive coverage to both sexes and cannot discriminate on sex-based characteristics (Newport News Shipbuilding Co. v. EEOC, 462 U.S. 669 (1983)).

The Supreme Court’s Bostock decision creates a compliance risk for plans that cover and treat individuals differently based on sexual orientation and/or gender identity. Bostock will bolster Title VII challenges to transgender benefit exclusions and make reliance on §1557 of the Affordable Care Act (ACA) less important for employment discrimination claims. Although none of the Bostock cases raised §1557 issues, the Supreme Court’s opinion will certainly influence how lower courts and HHS interpret the scope of this provision’s protections.

ACA Anti-Discrimination Ban

ACA §1557 bans discrimination “on the basis of sex” (as well as race, age, disability, color and national origin) in health programs and activities receiving federal funds, including providers, hospitals and medical systems. The nondiscrimination provision in §1557 derives from several federal statutes, including Title VI and Title IX of the CRA, the Age Discrimination Act of 1975, and Section 504 of the Rehabilitation Act of 1973. Title VI of the CRA bars race, color and national origin discrimination in federally funded programs and activities. Title IX, added to the CRA by the Education Amendments of 1972, extends Title VII’s sex nondiscrimination standards to federally funded educational programs and activities.

The initial Section 1557 regulations, which were finalized in 2016, defined “on the basis of sex”[1] to include “discrimination on the basis of pregnancy, false pregnancy, termination of pregnancy, or recovery therefrom, childbirth or related medical conditions, sex stereotyping, and gender identity.” 45 CFR §92.4. Courts interpreted §1557 to prohibit discrimination based on gender identity, gender expression and transgender status in healthcare, including insurers and even some group health plans. Under these rules, a group health plan subject to Section 1557 could not categorically exclude or limit coverage for all health services related to gender identity or other discriminatory restrictions on health services related to gender dysphoria. Healthcare providers likewise could not discriminate against or deny care to transgender individuals.

On June 12, 2020, HHS published revised §1557 regulations that remove the healthcare and health coverage protections for transgender and gay individuals and limits the entities subject to §1557. Among other significant departures from the 2016 rules, the new final rule:

  • Removes language recognizing individuals’ right to sue and obtain monetary damages for violations;
  • Eliminates the gender-identity and sex-stereotyping nondiscrimination requirements for healthcare providers;
  • Expands healthcare providers’ ability to refuse to provide care they find objectionable on religious or moral grounds; and
  • States that §1557 does not apply to employer-sponsored group health plans that do not receive federal financial assistance and are not principally engaged in the business of providing healthcare.

Importantly, the new HHS final rule on §1557 also includes the following commentary:

On April 22, 2019, the U.S. Supreme Court granted three petitions for writs of certiorari, raising the question whether Title VII’s prohibition on discrimination on the basis of sex also bars discrimination on the basis of gender identity or sexual orientation. Because Title IX adopts the substantive and legal standards of Title VII, a holding by the U.S. Supreme Court on the definition of “sex” under Title VII will likely have ramifications for the definition of “sex” under Title IX, and for the cases raising sexual orientation or gender identity claims under Section 1557 and Title IX which are still pending in district courts.

HHS’ comment, published just three days prior to the Bostock decision, will undoubtedly lead to the HHS having difficulty justifying the removal of sexual identity and orientation protections from the §1557 regulations. Bostock will also influence the outcome of §1557 discrimination claims in federal courts. However, now that the Supreme Court has ruled that Title VII protects transgender and gay individuals from discrimination, reliance on §1557 of the ACA may become less important for disputes involving employment-based coverage.

Employer Considerations

Bostock’s Title VII decision will have far-reaching consequences for employers and the workforce that go well beyond benefits and could influence how other federal and state sex nondiscrimination laws apply to sports, schools and public accommodations. For now, employers evaluating existing limits on health coverage for same-sex spouses or gender-transition services need to keep in mind not just Title VII but also other federal and state laws protecting the LGBTQ community.

Here are some things for employers to do in light of the Supreme Court’s Bostock decision:

  • Review anti-harassment and other workplace policies and training programs on LGBTQ issues, taking applicable federal and state laws into consideration.
  • For employers that are federal contractors or subcontractors, ensure compliance with the ongoing contracting requirements prohibiting LGBTQ discrimination.
  • For employers receiving federal funding for their health plans or other health activities, follow developments in the ACA Section 1557 nondiscrimination guidance.
  • Review group health plan coverage for same-sex spouses, services related to gender dysphoria, and gender-affirmation surgeries.
  • Review disability plan coverage for temporary disability due to gender-specific surgeries.
  • Review employee assistance programs (mental health, behavioral health) for offerings specific to the needs of LGBTQ members.
  • Employers with strongly-held religious beliefs should consult with legal counsel if they wish to exclude treatments specific to sexual orientation or gender identity such as gender dysphoria.

[1] Bostock analyzed language in Title VII, which says “because of sex”, while the HHS final rule relies on Title IX, which uses the phrase “on the basis of sex”.

Questions? Our employment lawyers can help.