A New York state legal settlement involving transgender job applicants and employees of the clothing retailer American Eagle Outfitters, Inc. (AEO) could influence companies in other areas to take a closer look at their appearance and hiring policies.

The reason, analysts say, is that the company agreed under pressure to amend its antidiscrimination policies to add protection for another type of worker.

On April 6, 2010, New York Attorney General Andrew Cuomo announced that AEO had agreed to end discrimination against persons who alter their sexual identity or their expression of gender.

On May 13, AEO said it was not admitting to “the findings” of the attorney general but agreed to the settlement to avoid the “expense and distraction of a prolonged argument,” according to a company spokesperson, who added, “We wholeheartedly believe that transgender individuals should be treated equally.”

As part of the settlement, AEO agreed to revise company policies to add “gender identity and expression” as a protected classification. The company agreed to educate its employees on transgender issues, to instruct workers who allege discrimination on how to file an EEO complaint, and to train store managers on how to handle EEO cases.

The AEO employee dress code had stated that it was “inappropriate for women to wear men’s products and men to wear women’s products.” Under the settlement, AEO agreed to revise its personal appearance standards to allow employees to wear clothing “consistent with their gender identity and expression.”

Testing for Discrimination

The complaint originated with a community group called Make The Road New York (MTRNY), which said it organized pairs of “testers”—one transgender and one not—to apply for jobs with 24 New York City retail businesses in 2008. The attorney general’s office said the pairs were “matched by race, sex, personality and general appearance,” trained to provide equivalent interview answers, and “provided with resumes reflecting that the transgender applicant was more qualified to work as a sales associate.”

At AEO and at clothing retailer J. Crew, there were “patterns of discrimination,” according to MTRNY Supervising Organizer Irene Tung. At AEO, “Two separate transgender testers were not hired. Non transgender testers who went in two minutes afterward were hired.” Tung says the same hired and not-hired numbers were seen at J. Crew.

The New York attorney general’s office concluded that AEO had discriminated illegally against the transgender applicants. However, the state has not announced any conclusions about J. Crew. “As far as we know,” Tung said, “the AG continues to investigate.” J. Crew said the allegations are without merit. “J. Crew does not discriminate on the basis of gender identity or expression,” said a spokesperson. “We have a zero tolerance for any type of discrimination across our entire company.”

Persuasive, if Not Precedential

How to handle transgender job applicants is “not something most companies have thought about, ”according to Jillian T. Weiss, associate professor of law and society at Ramapo College of New Jersey, whose research has involved hundreds of companies and public agencies that have adopted gender identity policies. “The feeling has been, among companies not necessarily looking to be more progressive but wanting to comply with the law, [not to] take this issue terribly seriously unless they’ve had employees who were transgendering,” Weiss said.

About the AEO settlement, she added, “I don’t know that it’s going to have a legal effect [nationally], since it involves laws only in New York City and New York state, but I do think it will have a persuasive effect on other companies.”

That’s because alert HR professionals will see that government regulators are becoming more likely to take up the issues of gender identity and its outward expression in clothing and appearance as a matter of anti-discrimination policy. “It is part of a larger picture that companies will take into consideration when thinking about legal compliance,” Weiss said.

Donna Rose, who speaks on transgender issues to business groups, predicted that HR managers will want to adjust their companies’ policies before coming under pressure from regulators or lawmakers. “Corporate America by and large is far ahead of the legislative component,” Rose said.

“A corporation will decide what its policies are and enforce them.”

Allyson Robinson of the Human Rights Campaign, a Washington, D.C.-based civil rights organization focused on gay and transgender issues, said there’s a bottom-line benefit. “By stating very clearly that your workplace will be inclusive for all and welcoming for all,” she said, “you’re not just showing transgender or LGBT [lesbian, gay, bisexual and transgender] people that your company is a place where their contribution would be welcome but increasingly you’re showing a whole generation of people who value inclusion that [they] can feel good about working there.”

Internal Impetus

Rose agreed with Weiss that companies with employees going through gender transition are more likely to devise anti-discrimination policies that include gender identity and expression.

“Change happens more from inside than outside,” Rose observed. “When you have somebody on staff going through something like this, [a person] with a track record of excellent performance, or when the company has invested a significant amount of money, there’s a much greater degree of commitment to this person than to a faceless person who comes through the door.” Change is incremental, Rose added. Company self-assessments can contribute to culture wide shifts in anti-discrimination attitudes in time. “Every brick that you can put in the wall demonstrates there is an awareness … a need for these kinds of protections for all of us in the law.”