Status Report on North Carolina House Bill 2

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Employment Law, Benefits & Compensation

Status Report on North Carolina House Bill 2

If you have a Facebook or Twitter account, or watch TV, you have probably heard about North Carolina House Bill 2 (“HB2”). So has the world. The marketplace reacted, and Governor Pat McCrory has issued an Executive Order in response. However, after weeks of activity and debate, where are we? Employers, providers of products and services and ordinary citizens in North Carolina are concerned and unsure of what is expected of them, as even more changes are anticipated.

House Bill 2—What does it say?

On March 23, Governor McCrory signed into law a bill which is being widely reported as legislation designed to keep all multiple occupancy bathrooms single sex based on gender identity as reflected on an individual’s birth certificate—the origin of the misnomer “The Bathroom Bill.” However, closer inspection of the text of HB2 illustrates it has a far broader impact.

Initially, the most reported concern with respect to HB2 was its stated imposition of narrow anti-discrimination rules. HB2 also contains a public policy statement which goes well beyond application of anti-discrimination rules and contains a bar to private civil discrimination suits in state court. The public policy statement is written broadly to cover all protected classes of employees. Therefore, HB2 created, on its face, a situation where employees and employers with over 15 employees with discrimination disputes can only seek resolution of their claims in federal court (other than certain claims for persons covered under the North Carolina Persons with Disabilities Act). By way of example, this would mean that a person who wishes to sue in the State of North Carolina over a discrimination claim based on race, religion, age, sex or nationality can no longer do so in state court.

On its face, HB2 also raises concerns that a private employer, or a local government (such as city or county government), cannot make and impose its own anti-discrimination, inclusion and accommodation policies and practices at facilities located in the State of North Carolina. Since HB2 was enacted in reaction to a local government rule aimed to protect and accommodate citizens and employees based on gender identity and/or sexual orientation, it is important to note that the U.S. Equal Employment Opportunity Commission (the “EEOC”) which is responsible for enforcing federal laws that make it illegal to discriminate against a job applicant or an employee because of the person's race, color, religion, sex (including pregnancy), national origin, age (40 or older), disability or genetic information, interprets and enforces the federal prohibition of sex discrimination under Title VII as “forbidding any employment discrimination based on gender identity or sexual orientation. These protections apply regardless of any contrary state or local laws.”  

As a result of the express provisions of HB2, the public policy statement it embodies, and the contradictory interpretations of HB2 when compared with federal law, the business community, colleges and universities as well as governments and private citizens have all begun to voice their concerns. 

Public Reaction to HB2

In the wake of North Carolina’s adoption of HB2, the corporate community has responded with very public announcements. For example, both PayPal and Deutsche Bank announced they would cancel expansion plans in North Carolina. 

The following is a list of some of the larger companies which have publicly condemned HB2 to date:  

Larger Companies Who Publicly Condemned HB2

Other large national and global companies, as well as a number of local North Carolina companies, have also issued statements generally or specifically expressing their disappointment in the law, and/or opposition of laws that enable or encourage discrimination, some calling for a federal framework to prevent more state legislatures from passing legislation that is similarly disruptive to conducting business in and with a state.  

It is important to note that HB2 has received some support from the business community such as the Charlotte Christian Chamber, a number of its members and other small businesses from across the state, the North Carolina Values Coalition, American Family Values Coalition, and the Civitas Institute.

A number of universities, including Davidson, Duke and Wake Forest, as well as several out of state universities, have also spoken out against HB2. University leadership has raised concerns that compliance with HB2 could endanger over $4.5 billion the state receives in Title IX federal education funding.  

Margaret Spellings, President of the University of North Carolina System, issued guidance to universities within the system as to the application and interpretation of HB2 (which she later clarified as “in no way an endorsement of the law”). In response, the University of North Carolina at Chapel Hill published the following statement:

All that Carolina has worked hard to establish over the decades – policies including protections for sexual orientation and gender identity, and fostering a culture of acceptance, respect for one another and human dignity above all else – remain a fundamental cornerstone of what our University aspires to be. Although the policies on our campus remain, there is no question that many in our LGBTQ community and many others are feeling unwelcome, unsafe and unhappy in the communities where they live and work. We all must work tirelessly to ensure that every member of our community feels welcome and safe and is able to share equally in the benefits of this place where we work, study and live.

In addition, the National Collegiate Athletic Association (“NCAA”) is publicly considering whether to move 20 or more games (including the Division 1 men's basketball tournament) from the State and the National Basketball Association (“NBA”) stated that while it has no plan currently to move the 2017 All-Star Game to be held in Charlotte, it views HB2 as “problematic.”

The State of New York, as well as the cities of Seattle, San Francisco and West Palm Beach have all banned any publicly-funded, non-essential travel for their employees to the State of North Carolina, specifically citing HB2’s treatment of the lesbian, gay, bisexual and transgender (“LGBT”) community as the cause. 

Several popular cultural events, including performances by Bruce Springsteen, Cirque du Soleil and Pearl Jam scheduled to be held in North Carolina, have been canceled by the performers while publicly stating opposition to HB2. These cancellations have a direct impact on the State’s economy and cultural events offered to North Carolinians and mark a growing wave of popular icons speaking out against the legislation.  

The full economic impact of HB2 on the State of North Carolina may never be fully quantified.

North Carolina’s Response to the Public

On March 29, 2016, Governor McCrory first released a video message to the State’s citizens, and on April 12th, he signed Executive Order No. 93, with the stated goal of “protecting privacy and equality,” and again published a video message to North Carolinians. 

Governor McCrory’s Executive Order No. 93, in summary, provides:

  • Public agencies in the State will serve all people equally when providing government services and the administration of programs.
  • Private businesses, nonprofit organizations, and local governments have the right to establish their own non-discrimination employment policies, and further affirms the State of North Carolina will administer its human resources policies, practices and programs equally without unlawful discrimination, harassment or retaliation on the basis of race, religion, color, national origin, sex, sexual orientation, gender identity, age, political affiliation, genetic information or disability.
  • Restroom accommodation laws differ for the private versus public sector.
    • Private businesses can set their own rules for restroom, locker room and shower facilities, free from government interference.
    • The agencies of North Carolina will apply the birth certificate gender rule to all of its multiple occupancy restrooms, but will make reasonable accommodation upon request. Each State agency may also determine, in its own judgment, to provide a single occupancy restroom, locker room or shower facility available upon request.
    • Private entity tenants of the state with exclusive possession of multiple occupancy restrooms, locker rooms and shower facilities may apply their own policies to the use of those facilities.
    • State agencies, local governments and the university and community college system are invited to interpret provisions with respect to restroom accommodations in the same manner as the State of North Carolina.
  • The Human Relations Commission in the North Carolina Department of Administration will promote equality and opportunity for all citizens of the State.  The Commission is now required to submit an annual report to the Governor on the number and nature of complaints, investigations completed, conciliations, and education and outreach efforts.

In his Executive Order, Governor McCrory also encourages the General Assembly to restore the right of citizens to state court proceedings for wrongful discharge based on unlawful employment discrimination. The Governor, however, stopped short of including proceedings for any other claims arising from discrimination of a protected class. The General Assembly will reconvene on April 25, 2016, and it, therefore, remains to be seen what the result will be regarding this newest request in the Governor’s Executive Order. 

In an attempt to remedy the seemingly contradictory federal and North Carolina state legislation, Executive Order No.93 confirms that HB2 should not “…be interpreted as an abrogation of any requirements otherwise imposed by applicable federal or state laws or regulations.”

Where We Are Now?

  • If you are an employer with under 15 common law employees (counting any misclassified contractors), none of this applies to you as an employer—yet.  It is recommended, however, that you keep anti-discrimination and accommodation issues on your radar for the future should you grow to become subject to the state and federal requirements.
  • As of today, private employers may continue to apply their own anti-discrimination and accommodation policies and practices, consistent with federal law, within the State of North Carolina. This includes the requirements imposed by Title VII, including the EEOC’s interpretation of such requirements as it applies to LGBT workers. 
  • With respect to restroom accommodations, private companies may decide the rules of use:
    • Single occupancy restrooms for employees or customers are not required, but you certainly may provide this if you choose;
    • Employers do not have to require employees to select a restroom, locker room or shower facility based on the gender reported on their birth certificate, but you may do so (as long as you are providing other reasonable accommodations for transgender individuals consistent with federal laws); and 
    • Employers may maintain a unisex, multiple occupancy bathroom for its employees.
  • No new discrimination claims under the North Carolina Equal Employment Practices Act may be brought in state court, unless and until the General Assembly reverses the bar to private action enforcing the Equal Employment Practices Act. (This means most discrimination claims will have to be filed in federal court.)
  • If your private company leases space from a State agency or local government and you have exclusive access to a restroom, locker room or shower facility, you get to decide the rules of use. If you do not have exclusive access, your employees, customers and guests will be subject to the State's “birth certificate record of gender rule” when using the facility. However, your company or the individual employee may request special accommodation from the governmental landlord when using the facility if special circumstances exist.
  • Businesses with policies which prohibit the provision of goods, services or accommodation to any member of the public (for example, businesses choosing to deny services to LBGT citizens) cannot be barred from bidding on a contract or qualification-based selection by state or local government, except as otherwise required under state law.

Local Update

The News & Observer reported on April 19, 2016 that the Greater Raleigh Convention and Visitors Bureau estimates Wake County’s economic losses due to adoption of HB2 have quadrupled during the preceding week, bringing the total estimated losses to $3.1 million. Later the same day, the Greater Raleigh Chamber of Commerce formally called on the legislature to repeal HB2, and the Raleigh City Council formally opposed HB2. Raleigh Mayor Nancy McFarlane, leading the Council, stated “Raleigh’s legislative team has been and will continue to work hard in the legislature to change HB2…” further stating “it does not represent Raleigh’s values.”

National Update

On April 19, 2016, a federal appeals court in the neighboring State of Virginia held that a public high school’s policy barring a transgender student from using the boys’ restroom is discriminatory. This case is likely to have significant implications on the developing situation in the State of North Carolina because the deciding court’s jurisdiction includes Maryland, North Carolina, South Carolina, Virginia and West Virginia. At a minimum, the case illustrates that the current debate extends beyond the borders of the State of North Carolina. 

What Should You Do About HB2 Now?

The implications of HB2 continue to develop on a daily basis. Many employers are facing an increasing number of questions from employees, clients, customers, investors and business partners about their anti-discriminatory policies and practices. Some employers are preparing for federal legislation that will level the playing field across the country.  

With HB2 being the source of so much debate, now is an appropriate time for companies to review their current policies and practices for compliance with state and federal requirements. The Employment Law Group at Hutchison has actively provided assistance to a number of clients in developing stakeholder communications around company anti-discrimination and accommodations policies and practices.  

If you would like to receive future updates from us on HB2, please email with HB2 in the subject line. 

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Hutchison recognizes that one of the strengths of our practice is the diversity of our attorneys, staff and the clients we represent. As a firm, Hutchison has always been and continues to be opposed to discrimination in all forms, however manifested.