More employers are likely to confront the issue of discrimination involving transsexual employees as state and federal law moves in the direction of affording such workers greater protection.

The issue can leave even well-meaning employers with some difficult problems to resolve, including designating appropriate restrooms without also offending the sensibilities of other employees.

A transsexual is someone whose innate sense of gender conflicts with his or her anatomy. Some, but not all, transsexuals undergo medical treatments, including hormone therapy and surgeries, so that they appear physically in harmony with their gender identity.

There are no reliable statistics on the number of transsexuals in the United States, in large part because there are no agreed-upon definitions of what constitutes such an individual. Some, for instance, believe undergoing hormonal treatments is sufficient to meet the minimum definition, while others contend more extensive treatments are required. An often-cited, although controversial, estimate is that one in 30,000 males and one in 100,000 females seek sex-reassignment surgery.

According to the Washington-based Human Rights Campaign, four states have laws that prohibit discrimination based on gender identity as well as sexual orientation: California, Minnesota, New Mexico and Rhode Island. The District of Columbia also bars such discrimination.

In addition, seven states have state courts, commissions or agencies that have interpreted existing state law to include some protection against discrimination for transgendered individuals, including transsexuals. They are Connecticut, Florida, Illinois, Hawaii, Massachusetts, New Jersey and New York.

California has the most recently enacted legislation. A.B. 196, which was signed by former Gov. Gray Davis in August 2003 and took effect in January, expands the prohibition on sex discrimination and harassment to include gender in the definition of sex. This means the law protects individuals who exhibit traits that are not stereotypically associated with their sex at birth.

The law still permits employers to require employees to adhere to reasonable workplace appearance and standards, but only provided they are allowed to dress consistently with their gender identity.

Lizbeth V. West, an employer attorney with Weintraub Genshlea Chediak Sproul in Sacramento, said the legislation "answered the question that gender, including gender identity, is a protected class in California."

It does, though, raise "practical difficulties for employers" with regard to day-to-day management, including the implementation of dress codes and the use of rest-rooms, said Ms. West.

If a transsexual, for instance, has not completed the sex-change operations needed to transition from a male to a female but is living out a female identity, should an employer let that individual use a women's restroom, which may make other employees uncomfortable? asked Ms. West. The privacy of such employees must be balanced with accommodating or respecting a transgendered employee's identity, she said.

James McDonald Jr., an employer attorney with Fisher & Phillips in Irvine, Calif., said there are several approaches that can be taken to address this issue. Some employers have taken the position that the transgendered individual "has to use the restroom of his or her prior gender until the gender process is complete."

Another approach is that "once the employee has announced he or she is going through the gender transition process, they should at that point be allowed to use the rest- room of the new gender." That, however, "tends to be disturbing to employees." A third approach is to have a separate restroom facility for the transgendered individual. "That's fine if you have one that you can use" and it is acceptable to the employee, said Mr. McDonald.

Little case law

With few states so far that protect gender identity, there is "not enough case law to guide employers at this point," particularly in California, where the issue is relatively new, said Ms. West.

One decision observers say is significant is an opinion by the 6th U.S. Circuit Court of Appeals in Cincinnati in Smith vs. City of Salem, Ohio, which was originally issued in June then revised by the court and reissued in August.

The case involves Jimmie L. Smith, a lieutenant in the Salem, Ohio, fire department. After being diagnosed with "gender identity disorder," Mr. Smith began "expressing a more feminine appearance on a full-time basis," according to court papers. After he was suspended for a 24-hour shift based on his alleged infraction of a policy, Mr. Smith filed suit in federal district court, claiming sex discrimination and retaliation.

In overturning a lower court decision that dismissed his claims, a unanimous three-judge panel ruled that Mr. Smith could pursue his claims of sex discrimination against the city under Title VII of the Civil Rights Act of 1964 and the equal protection clause of the Constitution's 14th Amendment.

The appellate court referred to the U.S. Supreme Court's 1989 decision in Price Waterhouse vs. Hopkins, in which the high court held that Title VII bars gender discrimination, including discrimination based on sex stereotypes. "After Price Waterhouse, an employer who discriminates against women because, for instance, they do not wear dresses or makeup, is engaging in sex discrimination because the discrimination would not occur but for the victim's sex.

"It follows that employers who discriminate against men because they do wear dresses and makeup, or otherwise act femininely, are also engaging in sex discrimination, because the discrimination would not occur but for the victim's sex," said the appellate court. The case was remanded to the district court for further proceedings.

The 6th Circuit "is the first circuit in the country to find that Title VII sex discrimination protection explicitly protects transgendered people from workplace discrimination," said HRC Senior Counsel Liz Seaton. Many courts are now examining this issue for the first time and are "looking very broadly to see what kind of interpretations and language is out there," Ms. Seaton said. From that perspective, she said, the 6th Circuit decision will be influential.

John D. Canoni, an employer attorney with Nixon Peabody in New York, also called the decision significant. Initially, he said, transsexuals met with little success pursuing discrimination claims in the courts because they sought protection solely on the grounds of their status as transsexuals. "The courts would not entertain those claims," he said. More recently, though, transsexuals have had success on the grounds of gender stereotyping, an approach that has now been endorsed by the 6th Circuit decision. "That theory is absolutely solid," said Mr. Canoni. "I think transsexuals finally have redress."

Mr. McDonald said some circuits, such as the 9th U.S. Circuit Court of Appeals in San Francisco, "may view this as something that's covered by Title VII. Other courts, I think, will take the position that Title VII doesn't go that broadly, and maybe someday the Supreme Court is going to have to resolve it."

Decisions such as the 6th Circuit's will have an impact on the workplace, though, said Paul Mollica, a plaintiffs attorney with Meites, Mulder, Burger & Mollica in Chicago. "My feeling is, with these kinds of cases out there, wise human resources professionals are going to include language in their training that people deserve to be treated with respect regardless of gender."

The trend toward greater protection of transsexuals will continue, say observers. The 6th Circuit decision "reflects a growing trend in the country toward both interpreting existing law as well as making explicit law to protect transgendered people from discrimination," said the HRC's Ms. Seaton.

"I think we're seeing an increasing amount of protection, both in case law and in local and state ordinances, so I think the overall picture is pretty encouraging," said Janis Walworth, director of the Bellingham, Wash.-based Center for Gender Sanity, which assists with transgender issues in the workplace.