Approximately one week before changes to Charlotte’s non-discrimination ordinances were to take effect, the State of North Carolina enacted a law that not only invalidates the amendments, but also has broader implications for all state discrimination claims. 

Background

In February 2016, the City Council for Charlotte, North Carolina – the state’s largest city – amended the city’s non-discrimination ordinances to add marital and familial status, sexual orientation, gender expression and gender identity to the list of protected characteristics.  The changes affected Charlotte’s ordinances regarding public accommodations, passenger vehicles for hire, and commercial non-discrimination.  As a result of the changes to public accommodations-related provisions, the ordinance allowed transgender individuals to use restrooms of the gender with which they identify as opposed to the gender to which they were assigned at birth. 

On March 23, 2016, the North Carolina General Assembly convened a special session and passed a bill aimed at reversing the amendments by the Charlotte City Council.  Twelve hours after the bill was introduced, Governor Pat McCrory – who was Charlotte’s longest-serving mayor before being elected to the state’s highest office – signed House Bill 2, entitled the Public Facilities Privacy and Security Act (the “Public Facilities Law”), into law on March 24, 2016.  The scope of the Public Facilities Law does more than just preempt Charlotte’s ordinance.  The Public Facilities Law amends all existing North Carolina statutes, ordinances, and regulations with respect to bathrooms and changing facilities in public schools and agencies, and public accommodations generally.  It also amends provisions in the North Carolina Equal Employment Practices Act (the “NCEEPA”), N.C. Gen. Stat. §143-422.2, et seq.

How Does the Public Facilities Law Change Existing North Carolina Statutes and Local Ordinances and Regulations?

The Public Facilities Law expressly regulates public schools and government agencies, including, for example, libraries, parks, courthouses, airports, public universities, and state hospitals.  Specifically, the law requires all government entities to designate multiple-occupancy bathrooms and changing facilities (i.e., restrooms, locker rooms, or other facilities where more than one person may be undressing) for use by people based on their “biological sex.”  The law defines “biological sex” as the gender listed on a person’s birth certificate.¹ 

In addition to regulating state government buildings, the Public Facilities Law nullifies all local ordinances concerning wages, employment and public accommodations.  (See the Public Facilities Law’s amendments to N.C. Gen. Stat. § 95-25.1(c), 143-422.2).  The Public Facilities Law also adds a new “equal access to public accommodations” requirement to North Carolina law that prohibits discrimination based on “biological sex,” among other categories, in places of public accommodation. (See the Public Facilities Law’s amendments to N.C. Gen. Stat. §143-422.2).  The combined effect of these two provisions prevents cities and local municipalities within the state, like Charlotte, from prohibiting discrimination in public places based on classifications like sexual orientation and gender identity and expression. 

Notably, the restroom and changing facility regulations do not apply to or affect private businesses.  As a result, private companies with operations in North Carolina are free to implement their own policies that permit employees, customers, and third parties access to restrooms and locker or dressing rooms that correspond to their gender identity or expression.  (See the Public Facilities Law amendments to N.C. Gen. Stat. §143-422.10-13).  If, however, a private company voluntarily designates a restroom for use based on “biological sex” pursuant to the Public Facilities Law, such a policy will not give rise to a claim of discrimination under North Carolina state law.² (See the Public Facilities Law amendments to N.C. Gen. Stat. §143-422.1).

A final, significant change contained in the Public Facilities Law relates to the filing of employment discrimination lawsuits.  For more than a decade, North Carolina employees have been permitted to file wrongful termination lawsuits based on the state’s policy against discrimination, as set forth in the NCEEPA.  Prior to the passage of the Public Facilities Law, an employment discrimination claim premised on the NCEEPA could be brought in addition to or in lieu of a federal employment discrimination claim based on the same type of discrimination, though federal claims are subject to different timing and administrative requirements and damages limitations.  The Public Facilities Law expressly states that “no person may bring any civil action based upon the public policy expressed [in the NCEEPA].”  (See the Public Facilities Law’s amendments to N.C. Gen. Stat. §143-422.3).  Accordingly, North Carolina employees are limited to bringing claims of race, age, gender, and religious discrimination under federal laws, such as Title VII and the ADEA.  Employees may still file suit in North Carolina state court based on other state statutes containing recognized public policies like the North Carolina Wage and Hour Act.

Takeaways for Companies with Operations in North Carolina

• The new law’s regulations related to restrooms and changing facilities do not apply to private companies.  Therefore, private companies still may implement their own policies allowing restroom access by employees, customers, and third parties based on an individual’s gender identity or expression. 
• The Public Facilities law permits private companies to designate use of restrooms and changing facilities based on “biological sex,” and thereby require transgender employees to use the restroom that aligns with the gender assigned on his or her birth certificate.  Such a policy is permissible under North Carolina law, but may place an employer at risk for a claim of discrimination under Title VII and other federal statutes and regulations.
• According to the terms of the Public Facilities Law, the law is to take effect immediately and applies to any action commenced, any municipal regulation adopted, and any contract entered into on or after March 24, 2016.  This may change, as on March 28, 2016, the American Civil Liberties Union, Equality North Carolina, and three individuals filed a federal lawsuit against the statute, alleging that it violates LGBTQ people's constitutional rights and federal law.