On March 23 following a one-day special session, the North Carolina General Assembly passed, and Governor McCrory signed HB 2, a bill that will have widespread effects on legal protections for employees in North Carolina. The legislation was prompted by a Charlotte ordinance that prohibited businesses from discriminating against LGBT customers. The General Assembly reacted to a provision in the ordinance that would restrict businesses from prohibiting transgender persons from using restrooms that match their gender identity. However, the final legislation contains provisions that go well beyond this bathroom use question, and even well beyond the issue of legal protections for LGBT individuals.

HB 2 strips from North Carolina municipalities the ability to adopt local provisions that prohibit discrimination on any protected basis. Instead, the law establishes a list of statewide protected classes that excludes LGBT status. In addition to a ban on ordinances that would restrict commercial businesses from refusing to do business with LGBT persons, the law also prohibits local governments from adopting measures that would prohibit such discrimination in employment.

The law would also prohibit employees from suing for wrongful discharge if they are terminated based on LGBT status. Employees would still have the option of pursuing federal claims for employment discrimination, and the Equal Employment Opportunity Commission recently stated its position that Title VII protects LGBT persons. However, the Fourth Circuit has not addressed this argument, leaving open the possibility that HB 2 removes any legal recourse for LGBT employees.

The new law also contains other provisions that do not directly impact LGBT individuals. The new state antidiscrimination measures essentially eliminate the ability of persons who believe they have been discriminated against to bring wrongful discharge or other lawsuits in state court for race, gender, religion, disability or other employment claims. North Carolina becomes the second state after Mississippi to remove all state court remedies for employment discrimination. These plaintiffs would be limited to federal court to obtain relief for their claims. Finally, although not part of the Charlotte ordinance, HB 2 removes local governments’ ability to adopt minimum wages or other wage protections higher than the state minimums.

HB 2 is already facing judicial challenge. Several years ago, the Supreme Court invalidated a Colorado law that specifically removed municipalities’ ability to provide LGBT protections. A number of businesses have also expressed concern over the impact of the law and its inconsistency with their own diversity policies and practices.