According to title VII Tennessee employers can willfully discriminate against transgender persons but the courts have taken their own point of view on the issue.
Creative plaintiff lawyers have successfully filed charges of discrimination based on gender identity issues by framing them as prohibited sex discrimination. The Sixth Circuit Court of Appeals recently reaffirmed its long held position that Title VII does protect employees from discrimination based on "sex-stereotyping."
In the case, an openly homosexual employee in Nashville was harassed by a co-worker. When he complained to his union, the union quit referring him jobs. He sued claiming discrimination and retaliation based on his sexual orientation.
The court held that while Title VII does not protect against discrimination for sexual orientation, employees who are discriminated against because they do not conform to traditional notions of what is appropriate for one's gender can sue for sex-stereotyping. Thus a male employee who is very effeminate may be able to successfully claim sex discrimination.