What Businesses Need to Know About North Carolina’s Repeal of HB2, the ‘Bathroom Bill’

March 30, 2017

After just over a year of controversy — and lost corporate relocations, conferences and sporting events — the North Carolina General Assembly repealed North Carolina’s House Bill 2 (HB2) today, March 30. The new statute, however, includes provisions drawing criticism from both sides of this debate.

HB2 became law in March 2016 and was often referred to as the “bathroom bill.” Among other items, HB2 dictated that public school systems and government agencies in North Carolina require multiple occupancy bathrooms and changing facilities on government property to be designated and used based on “biological sex.” The bill defined biological sex as the gender listed on the person’s birth certificate, rather than a person’s gender identity. HB2 also superseded all local ordinances in North Carolina for public accommodations, including a Charlotte ordinance that prohibited public accommodations from discriminating on the basis of, among other things, sexual orientation or gender identity.

The passage of HB2 sparked numerous boycotts of the state. A recent study by the Associated Press concluded that HB2 would cost the state of North Carolina at least $3.7 billion by 2028 if it remained in effect.

Under today’s political compromise, the North Carolina General Assembly passed, and Gov. Roy Cooper signed, North Carolina House Bill 142. The bill passed in the North Carolina Senate on a 32-16 vote, and in the North Carolina House, 70-48. The new law includes three provisions.

  1. The new law repeals HB2. A number of groups that supported the original law have criticized the General Assembly for “caving” to economic pressure in deciding to repeal the original law.
  2. The new law provides that state and local government agencies “are preempted from regulation of access to multiple occupancy restrooms, showers or changing facilities, except in accordance with an act of the General Assembly.” While the wording of this provision is arguably less than clear, the intent seems to be that state and local government agencies may not issue rules on this topic either way. They may not require restrooms to be used based on biological sex and may not expressly permit restrooms to be used based on gender identity. Rather, only the General Assembly may regulate this issue (although no state statute currently does so). How this provision is applied in practice remains to be seen.
  3. The new law prohibits local governments from enacting any new ordinances (or amending any existing ordinances) regulating private employment or public accommodations. As a result, Charlotte and other cities in North Carolina may not enact rules prohibiting discrimination based on sexual orientation or gender identity by private employers or public accommodations. This part of the new law will expire Dec. 1, 2020. Advocacy groups for the LGBT community have been particularly critical of this provision, given that a number of cities in North Carolina were expected to pass or reinstate ordinances prohibiting discrimination on the basis of sexual orientation and gender identity if HB2 was repealed.  

With the repeal of HB2, but the addition of the compromise provisions in the new law, North Carolinians will now wait to see if the new law will reverse the boycotts and other negative economic effects of HB2. Regardless of its impact on the business climate, the new law continues a trend of state legislatures pre-empting local regulation of minimum wage and other labor and employment issues.

For further information or questions about the repeal of North Carolina HB2 or the new statute, please contact the authors, your McGuireWoods contact, or other members of the firm’s labor and employment department.