Withdrawal of Job Offer to Transsexual, Quirky Question # 68

Quirky Question # 68:

We recently filled a position with a highly qualified applicant.  After we made him an offer, he informed us that he soon would be undergoing a sex change operation.  He said that when he started the job, he would be a male, but within a month or two, his operation would be complete and he would be reporting to the job as a woman. We concluded that our company just did not need the complication this situation presented.  Therefore, we withdrew the offer and offered the position to another, admittedly less qualified, individual.  Any problems with our decision?

Dorsey’s Analysis:

My first reaction to the fact pattern you described is that regardless of whether there are any legal impediments to your decision or whether you have exposed your company to the risk of litigation and/or liability, I don’t understand why you would pass on an individual you describe as a “highly qualified applicant.”  Your decision is more perplexing in light of your acknowledgement that you have offered the job to another “admittedly less qualified” individual.

Purely from a business standpoint, don’t you want to populate your company with the most talented employees you can find?  Whether that talent derives from prior academic excellence, directly relevant work experience, outstanding interpersonal skills, or some other characteristic or qualification pertinent to the job requirements, these are the individuals who are going to make your company successful.  Ideally, they will contribute to your firm’s bottom line and increase the collective wealth of your other employees and shareholders alike.

Since you have not identified the nature of the job for which this individual was hired, let me offer a few hypothetical examples.  If the position you were filling was that of engineer, and the person you first hired and then rejected was a brilliant engineer, consider what could she have done for your company.  If she had designed a new product, or improved an existing product, and your company’s revenues were substantially increased as a consequence, would it really have mattered that she had had a sex change operation?  If the position you were filling was that of a salesperson, and the accepted/rejected applicant was an outstanding salesperson, with a proven track record who would have replicated her past successes at your company, would your sales manager have been concerned that she had had a sex change operation?  If you were hiring an employee in the Human Resources function, and the rejected applicant could have assisted you both to improve your policies and to persuade disgruntled employees that they should not pursue litigation against your company, would your VP of HR have cared that she had had a sex change operation?  As these and countless other examples illustrate, your decision to reject this applicant upon learning of her plans could have deprived your company of an outstanding contributor.

Moreover, simply because your company elected to withdraw the offer to her does not mean that one of your competitors will have the same attitude.  Consequently, you not only have eliminated a potentially valuable contributor from your workforce, you have increased the likelihood that this talented individual will be competing against you.  How will you feel if this employee designs a profitable product for your competition, or outperforms your “less qualified” hire in competitive sales opportunities?

I also wonder what “complications” you expected this “situation” to create.  Were you concerned that your other employees would not accept this individual if they learned of her sex change operation?  Was your concern based on empirical data or assumptions about how other employees would respond?  As my questions imply, I don’t think you should necessarily expect a negative reaction by your other employees.  Generally, it is preferable to give the situation a chance to unfold.  If your company did encounter problems, you could evaluate them, assess their legitimacy, and with input both from your new hire and your other employees, explore thoughtfully whether they could be resolved.

But enough of my pontificating about the business aspects of this situation.  Let’s examine the potential legal ramifications.  First, as you undoubtedly know, Title VII, the principal federal anti-discrimination statute says nothing about transsexuals.  Simply put, transsexuals are not a protected classification under the statute.  Moreover, Title VII does not provide protection for individuals based on sexual orientation.  The question, then, is whether Title VII’s prohibition against sex discrimination somehow reaches individuals who have elected to have a sex change operation.  More on that issue below.

Second, although Title VII may not prohibit sexual orientation discrimination, many states (now more than 20) have statutes prohibiting discrimination on the basis of sexual orientation.

Third, as I’ve touched on in other Blog analyses, typically, when plaintiffs allege discrimination under federal or state statutes (or both), they also plead common law claims.  Though more facts would be needed to assess this fact pattern, it is possible that the employee who was offered the job may have a claim for promissory estoppel.  As you describe in your inquiry, the employee was offered a job, before you later withdrew the offer.  If the employee quit another job, or took other actions in reliance on your offer (e.g., moved from another state, sold a home, etc.), she may have a legitimate promissory estoppel claim.

Let me now return to the potential statutory discrimination claims.

As referenced above, Title VII does not specifically protect transsexuals.  But there have been a number of recent decisions that have relied on the United States Supreme Court holding in Price Waterhouse v. Hopkins, 490 U.S. 228 (1989), a decision that held sexual stereotyping was barred by Title VII’s prohibition against sex discrimination, to extend Title VII protection to transsexuals.  For example, in Lopez v. River Oaks Imaging & Diagnostic Group, Inc., No. 4:06-cv-03999 (S.D. Texas, April 3, 2008), the federal district court denied the defendant’s summary judgment motion in a case involving a similar fact pattern.  Izza Lopez had applied for a position with a medical clinic that involved scheduling patient appointments over the telephone.  The defendant clinic offered Lopez a job, which she accepted, after which she resigned from her existing job.  In connection with the clinic’s background check, however, the clinic “discovered” that Lopez was “male” and allegedly had “misrepresented” himself as a woman during the interview.  Lopez sued under Title VII.

Lopez did not argue that Title VII protected transsexual employees, instead arguing that that she was entitled to pursue a claim based on Price Waterhouse’s prohibition of sex stereotyping.  The court agreed, observing “There is nothing in existing case law setting a point at which a man becomes too effeminate, or a woman becomes too masculine, to warrant protection under Title VII and Price Waterhouse.”  The court also observed that the explanations offered by the clinic in support of its “misrepresentation” argument were questionable, but pointed out that these factual issues were not appropriate for resolution on summary judgment.  The bottom line — the plaintiff’s Title VII lawsuit survived the defendant’s motion to dismiss.

Even more recently, the case of Schroer v. Billington, No. 05-1090 (D.D.C., Sept. 19, 2008), presented similar issues.  Schroer applied for a position with the Library of Congress’s Congressional Research Service as a terrorism research analyst.  Schroer was eminently qualified for the position: he had served in the Army for 25 years, during which time he had been in Special Forces units.  At the time of Schoer’s retirement in 2004, he was the Director of a 120-person classified organization that tracked and targeted high-threat international terrorists.  Among other responsibilities, Schroer regularly briefed the Vice President, the Secretary of Defense, and the Chairman of the Joint Chiefs of Staff.  Schroer held a Top Secret, Sensitive Compartmented Information security clearance.  Schroer also held Masters Degrees in History and International Relations and had graduated from both the National War College and the Army Command and General Staff College.

At the time Schroer interviewed for the job, he presented as a male.  He was deemed to be the most qualified applicant and was offered the job.  At a luncheon following the communication of the job offer, Schroer advised his new employer that he was about to begin the phase of his gender transition in which he would be dressing in traditionally feminine clothing and presenting as a woman on a full-time basis.  Based on this information, the defendant withdrew the job offer.

The case was tried to the federal court.  The defendant articulated five reasons why it had withdrawn the job offer to Schroer; the court found all five were pretextual.  The court also held that whether analyzed under Price Waterhouse’s sexual stereotyping analysis or a strict reading of Title VII’s prohibition of sex discrimination, Schroer had proven a claim.  As the court observed, “What makes Schroer’s sex stereotyping theory difficult is that, when the plaintiff is transsexual, direct evidence of discrimination based on sex stereotypes may look a great deal like discrimination based on transsexuality itself, a characteristic that, in and of itself, nearly all federal courts have said is unprotected by Title VII.”  Despite the difficulty of this issue, the court found that it did not matter for purposes of determining liability whether the Library of Congress withdrew its offer of employment because it “perceived Schroer to be an insufficiently masculine man, an insufficiently feminine woman, or an inherently gender-nonconforming transsexual.”

Not only did the court find the defendant had engaged in sex stereotyping in violation of Title VII, it also found that Schroer had established a direct violation of Title VII.  The court heard competing expert testimony of experts, one of whom testified that the scientific community recognizes “nine factors that constitute a person’s sex.”  (Who knew?  I always thought it was a much simpler calculus.)  Pointing out the statutory prohibition of sex discrimination has been given a more expansive interpretation by the courts (e.g., includes sexual stereotyping and same-sex sexual discrimination), and drawing an interesting analogy to religious discrimination and the prohibition against discriminating against someone who “converted” from one religion to another, the court found that Schroer had established sex discrimination under Title VII.

As these cases illustrate (and there are other cases reaching opposite conclusions), withdrawing a job offer to someone who advises you that she is a transsexual is not without legal risks.  Thus, even if you are unpersuaded by the business justifications addressed above, there are some legal risks to which your decision exposes your company.

Although beyond the scope of this analysis, I also have concerns that your decision would present potential risks based on state anti-discrimination statutes prohibiting sexual orientation discrimination.  There is a risk that your withdrawal of the job offer could be viewed as sexual orientation discrimination.  More facts would be needed to develop this issue further, including the reasons articulated for why the offer was withdrawn and other relevant information regarding the composition of your workforce and past hiring patterns, to name just a few.  Whether you ultimately won or lost a claim for sexual orientation discrimination, however, you certainly risk the possibility that such a claim would be asserted.

Dorsey & Whitney

Dorsey is a business law firm, applying a business perspective to clients' needs. We make it our first priority to know the context in which you do business - your market, your competitors, your industry.

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