On October 23, 2014, the US Office of Special Counsel (OSC) announced the release of a prohibited personnel practice (PPP) report concerning the OSC's finding that the Army engaged in gender identity discrimination against a department specialist who was transitioning from male to female, in violation of the Civil Service Reform Act of 1978. The specialist experienced significant changes in working conditions even though her own conduct did not adversely affect her work performance or the work performance of her colleagues (5 U.S.C. § 2302(b)(10)). In addition, the Army's behavior constituted discriminatory harassment under the guiding principles of Title VII of the Civil Rights Act of 1964 (Title VII). (U.S. Office of Special Counsel Report of Prohibited Personnel Practice, OSC File No. MA-11-3846).)

Tiffany Lusardi was a civilian Army quality assurance specialist who announced a transition from male to female. Lusardi informed her superiors and colleagues of her upcoming transition. Although she received the Army's support, she also encountered a number of instances of discrimination based on her gender identity. This discrimination included:

Lusardi filed a complaint alleging that the Army discriminated against her based on her gender identity.

The OSC determined that the Army committed a PPP in violation of Section 2302(b)(10) of the Civil Service Reform Act of 1978 (Section 2302(b)(10)). Section 2302(b)(10) protects federal employees from discrimination for conduct that does not adversely affect the employee's performance or the performance of others. The provision's scope is wide, protecting conduct in the employees' perceived lives when not related to work.

While the OSC did not make a Title VII determination, it analyzed Lusardi's complaint as one of discriminatory harassment under the Title VII framework and applied Title VII's totality of circumstances standard to Lusardi's Section 2302(b)(10) claim. The OSC concluded that:

The OSC recommended (and the Army accepted) corrective action in the following forms:

In a separate matter, the OSC announced on October 16, 2014 that the Army, after an OSC investigation, changed Army Regulation 380-67 to state that no adverse inference can be drawn from an individual's sexual orientation regarding the holding of sensitive positions. The OSC investigation had resulted in a finding that the Army had violated the Civil Service Reform Act of 1978 by terminating a civilian employee for an online post regarding the employee's sexual orientation, which had no adverse affect on job performance. (5 U.S.C. § 2302(b)(10).)

Both of these announcements from the OSC represent significant steps forward for LGBT rights in the military and perhaps beyond. Each highlights that violations of LGBT rights can occur if the Army discriminates against someone for conduct that has no impact on the employment of the individual or others. Even if an employer has good intentions, holding out a transgender employee as different and subject to different standards is nevertheless discriminatory and unlawful. For example, providing an employee with a separate restroom and encouraging her not to use the ladies room with the other employees who identify as female is a form of segregation. Applying a higher degree of scrutiny to a transgender employee's discussions of personal matters based on the discomfort of co-workers has a chilling effect and alienates an employee. An employer cannot make its decisions based on the discomfort or complaints of other employees because that would cater to the prejudices that discrimination laws are designed to prevent.