The ACLU filed a complaint against Dignity Health, claiming that the total exclusion of care related to “sex transformation surgery” in Dignity’s employee health insurance plan is unlawful sex discrimination. Now the EEOC wants a piece of the action and is seeking permission to file an amicus brief urging the California federal court not to dismiss the ACLU’s suit challenging the health care conglomerate’s denial of coverage for a male nurse’s sex reassignment surgery.

Dignity Health asserts that the exclusion applies to all of its employees and is therefore non-discriminatory. The ACLU and now the EEOC argue that the exclusion violates Title VII because in reality it only affects transgender individuals who seek to transition.

In its amicus brief, the EEOC points to the Supreme Court’s 1989 opinion in Price Waterhouse v. Hopkins, holding that discrimination against a woman for masculine behavior (i.e., nonconforming to gender stereotypes) qualifies as sex discrimination. The EEOC asserts that the same reasoning in Price Waterhouse applies to discrimination against a transgender individual who seeks a medically necessary surgery to transition to his or her true gender. The Sixth and Ninth Circuits have extended Title VII’s protection to transgender individuals who do not conform to their assigned gender. Not all courts agree on Title VII’s breadth. In a recent opinion surveying the current legal landscape on this issue, the Seventh Circuit reaffirmed its long-standing precedent that Title VII does not provide a remedy for claims of discrimination based on sexual orientation.

As a practical matter, these filings in the Dignity Health  case show that an employer’s categorical policy, even one that applies to all employees, may still be challenged if it disproportionally affects a protected class under Title VII. The question will come down to whether transgender is a protected category or not. Cautious employers may want to review policies to make sure they are not the next target.