Employers are operating in an increasingly complex legal environment when it comes to transgender employees. Federal law continues to prohibit discrimination based on transgender status, but recent executive orders and shifting federal enforcement priorities have introduced new compliance considerations, particularly for federal contractors. This article provides practical guidance for employers seeking to understand their obligations and manage legal risk.
The current legal and political landscape presents a tension for employers. On one hand, the Supreme Court’s decision in Bostock v. Clayton County remains binding law, prohibiting discrimination against transgender employees under Title VII. On the other hand, recent executive actions have signaled that certain workplace diversity practices may draw federal scrutiny. For employers—especially those receiving federal funding—this creates compliance questions that require careful navigation.
The Legal Landscape
The foundational protection for transgender employees remains Bostock v. Clayton County (2020), in which the Supreme Court held that discrimination against an employee because of their transgender status is sex discrimination prohibited by Title VII of the Civil Rights Act of 1964. That holding has not changed, but the federal enforcement environment surrounding it has.
Executive Order 14168, issued January 20, 2025, declared federal policy to recognize only two biological sexes and directed federal agencies to remove policies that “promote gender ideology.” Issued the following day, Executive Order 14173 required federal contractors to certify that they do not operate programs the administration considers “illegal DEI.” In July 2025, the DOJ issued additional guidance (the Bondi Memo) identifying five categories of conduct that it views as unlawfully discriminatory DEI. Our team has analyzed these developments in detail: see Decoding the Executive Order on Gender Identity: Key Insights for Private Employers; Legal Perspectives on Executive Order 14173, DEI, and the False Claims Act; and DOJ Issues Sweeping Guidance on “Illegal DEI”: Key Legal Risks and Compliance Priorities for Federal Funds Recipients.
The practical effect is that private employers remain legally required to protect transgender employees under Bostock and Title VII, while federal contractors face additional risk that certain inclusive workplace practices may be characterized as promoting “gender ideology” or constituting “illegal DEI.” This creates a compliance tension, but with careful policy design, employers can meet their legal obligations while managing federal funding risk.
Inclusive Design for Everyone
All-gender restrooms are a clear example. A larger, all-gender family restroom serves a parent accompanying a child of a different gender, an employee needing space and privacy to change, a person with a disability who needs a companion or space for an assistive device, and a transgender employee, all without requiring identity-specific designations.
The same logic applies to affirmed name and pronoun policies. Rather than framing these as transgender-specific accommodations, employers can implement a company-wide “what would you like to be called” policy that applies to every employee, from colleagues who go by a nickname to transgender employees whose affirmed name differs from their legal name at the time of hire.
For federal contractors especially, universal framing is a meaningful risk-management tool. Contractors whose policies could be characterized as “promoting gender ideology” risk losing federal funding, being referred to the Department of Justice, or facing exposure under the False Claims Act. Policies designed to serve all employees are more difficult to characterize as identity-specific programs and are more defensible if challenged by a federal agency.
Practical Steps Employers Can Take Now
The following steps can help employers meet their legal obligations under Bostock while managing risk in the current federal enforcement environment:
- Open employee resource groups to all employees, regardless of their identity or identities.
- Implement a company-wide affirmed name and pronoun courtesy policy that applies to every employee as a matter of professional respect.
- Evaluate your facilities. Consider whether all-gender or single-occupancy restroom options are feasible.
- Train your people. Managers should understand that Bostock’s protections remain in force and that retaliation against individuals based on their gender identity is prohibited. All employees benefit from training on how to be welcoming to colleagues from different walks of life.
- Review your non-discrimination and anti-harassment policies. Confirm that “gender identity or expression” is expressly listed as a protected category. Federal contractors should work with counsel on precise policy language.
- Update personnel records and systems. Ensure HR systems, directories, and email addresses can reflect an employee’s affirmed name.
- Make dress codes gender neutral. Review any dress code to ensure it avoids gender stereotypes and applies consistently to all employees.
- Review employee benefits for unnecessary exclusions. Work with benefits counsel to identify and, where feasible, remove exclusions for medically necessary care related to gender dysphoria.
- Audit your existing programs under privilege. Identify anything that could be characterized as identity-specific and, where possible, restructure it to be open to all employees.
- Stay current. This area of law is moving fast. Build regular policy reviews into your compliance calendar and keep counsel engaged as federal guidance continues to evolve.
Conclusion
The regulatory environment has shifted significantly, but the underlying legal obligation has not. Bostock still requires employers to protect transgender employees from discrimination. The practical challenge for employers is designing policies that fulfill this obligation while avoiding characterization as identity-specific programs that could trigger federal scrutiny—particularly for those receiving federal funding. Universal, broadly applicable policies offer the strongest legal position.
If you have questions about building an inclusive workplace or navigating your obligations in the current legal environment, please contact your Husch Blackwell attorney.
Abby Zumbrunnen contributed to this article.