.WASHINGTON — The Justice Department warned the state of North Carolina on Wednesday that its new law limiting bathroom access violated the civil rights of transgender people, a finding that could mean millions of dollars in lost federal funds.
In a letter to Gov. Pat McCrory, Vanita Gupta, the top civil rights lawyer for the Justice Department, said that "both you and the State of North Carolina" were in violation of civil rights law and gave him until Monday to decide "whether you will remedy these violations."
A Justice Department official said that federal officials hoped that the state would agree to comply voluntarily with federal civil rights law by abandoning compliance or implementation of the measure. But the department has a number of tools it can use to try to force compliance, including denying federal funds or asking a court to do so, said the official, who spoke on condition of anonymity.
The ultimatum escalated what has already become a contentious national debate over North Carolina's new legal stance on transgender and gay people, and set up what could be a lengthy showdown between the state and the Obama administration.
In a statement, McCrory, a Republican, said, "The right and expectation of privacy in one of the most private areas of our personal lives is now in jeopardy. We will be reviewing to determine the next steps."
Senate leader Phil Berger accused the Justice Department of "a gross overreach" that he said "deserves to be struck down in federal court." Tim Moore, the speaker of the House, called the letter an attempt to "circumvent the will of the electorate and instead unilaterally exert its extreme agenda."
The state measure, House Bill 2, known as HB2, was signed into law in March and says the bathroom a person uses is determined by his or her original gender. That requirement "is facially discriminatory against transgender employees" because it treats them differently from other employees, Gupta wrote.
As a result, "we have concluded that in violation of Title VII, the state is engaged in a pattern or practice of resistance to the full enjoyment of Title VII right by employees of public agencies," she said.
The letter was first reported by The Charlotte Observer.
The law has become an issue in the presidential campaign and has prompted boycotts of North Carolina from celebrities like Bruce Springsteen, as well as calls for repeal by a number of businesses, some of which have canceled plans to create jobs in the state.
Opponents cheered the Justice Department's move.
"I think it makes clear what we've known all along, which is that HB2 is deeply discriminatory and violates civil rights law in all kinds of manners," said state Rep. Chris Sgro of Greensboro.
Matt McTighe, executive director of Freedom for All Americans, an LGBT rights group, said in a statement Wednesday that "actions have consequences, and Gov. McCrory and his legislative allies are now paying the price for this anti-transgender law that they so hurriedly enacted.
"HB 2 is a solution in a search of a problem that simply doesn't exist, and lawmakers must take immediate action to fully repeal it," he said. "The state's economy and reputation have suffered enough, and now students all across the state stand to lose out on nearly $1 billion in critical funding because of HB2. The livelihoods of North Carolina's families are at stake, and there is no excuse for inaction."
In December 2014, the attorney general at the time, Eric H. Holder Jr., directed the Justice Department to begin including gender identity — including transgender status — as a basis for discrimination claims under federal civil rights law.
That decision reversed a policy at the Justice Department that specifically excluded transgender people from federal protection. Holder called the decision "an important shift," meant to affirm the Justice Department's commitment "to protecting the civil rights of all Americans."
In addition, the Equal Opportunity Employment Commission held last year that "equal access to restrooms is a significant, basic condition of employment" and that denying access to transgender individuals was discriminatory, Gupta noted, in its letter to McCrory.
The Justice Department's threat was not the only front opened Wednesday in the battle over transgender bathroom rights.
In Illinois, a group calling itself Students and Parents for Privacy filed a lawsuit against the Department of Education, the Justice Department, Attorney General Loretta E. Lynch and the school directors of Township High School District 211 in Cook County, Illinois, seeking to stop the district from "forcing 14- to 17-year-old girls to use locker rooms and restrooms with biological males."
In November, federal education authorities ruled that the school district, near Chicago, violated Title IX, the federal law that forbids discrimination on the basis of sex in public education, when it did not allow a transgender student who said she identifies as a girl to change and shower in the girls' locker room without restrictions.
The fact that the student, who is biologically male, now uses the bathroom and locker rooms at William Fremd High School, the lawsuit states, creates an "intimidating and hostile environment" for girls, according to the lawsuit, which was filed Wednesday in the U.S. District Court in the Northern District of Illinois.
The suit also asks the court to set aside a Department of Education rule in which transgender students are covered under Title IX.
Meanwhile, in Oxford, Alabama, the City Council on Wednesday rescinded an ordinance it had passed the week before that forbade people from using a public restroom that did not match their gender at birth, according to the Alabama news website al.com.
The news service reported that at least one of the three members who voted to rescind the ordinance in the 3-2 vote was influenced by a city attorney's opinion that the ordinance might be illegal under Title IX.