For the third time in less than a year, a federal appeals court has ruled that an LGBT person can seek protection from job discrimination under Title VII of the U.S. Civil Rights Act of 1964.

The latest ruling, a March 7 decision from a three-judge panel of the Sixth Circuit, says that “sex” discrimination prohibited by Title VII in employment also includes “transgender” discrimination.

Lambda Legal’s Law and Policy Director Jenny Pizer called this latest ruling, in Stephens v. Harris Funeral, an “extraordinarily significant decision.” The liberal think tank ThinkProgress called it a “massive victory.”

Others are less enthusiastic, but everyone supporting equal rights for LGBT people sees Stephens as another important step in the right direction toward providing some protection for LGBT people in the workplace. More than half of states have no laws prohibiting discrimination based on sexual orientation or gender identity.

The Alliance Defending Freedom, a legal group frequently pushing against the legal interests of LGBT people –and the group who took sides against a transgender employee in this case—said the Sixth Circuit panel “misreads” the law and court precedents. Its senior counsel, Gary McCaleb, said the group would consult with Harris Funeral about whether to appeal the decision to the full circuit bench.

The Stephens v. Harris Funeral litigation began with a complaint filed with the U.S. Equal Employment Opportunity Commission (EEOC) by Aimee Stephens, an employee of the R.G. & G.R. Harris Funeral Home in Detroit, Michigan. In her first six years with the business, Stephens presented as a male. She had been identified as male at birth and named Anthony Stephens, but for her entire life, she felt she was female. In 2013, after deciding she wanted to live according to her sincerely held gender identity, she explained to the funeral home owner, Thomas Rost, that she would begin presenting and identifying as female.

Rost fired her, telling Stephens that he did not believe the public would accept her transition.

Stephens filed a complaint with the EEOC that, one year earlier, had determined Title VII’s prohibition on sex discrimination included a prohibition on discrimination based on gender identity.

Title VII of the Civil Rights Act of 1964 bans employment discrimination based on sex.

The EEOC agreed to sue Harris Funeral in federal court on Stephens’ behalf. It argued that Rost violated Title VII by discriminating against Stephens because she was transitioning and not conforming to sex-based stereotypes. During litigation, EEOC also determined that Rost had provided a clothing allowance for male employees but not female employees.

In court, Rost, who identifies as Christian, argued that he had a sincerely held religious belief that motivated his discrimination against Stephens. He said his funeral homes were operated to “honor God” and that he believes changing one’s gender identity violates God’s “commands” because gender is an “immutable God-given gift.”

The district court did not dismiss the lawsuit but said the lawsuit could not proceed on the grounds that Title VII prohibits job discrimination based on transgender status, but only on the basis of gender non-conformity. The district court also ruled, however, that Rost the federal Religious Freedom Restoration Act may protect Rost’s right to discriminate.

The Religious Freedom Restoration Act (RFRA), a federal law passed in 1993, prohibits any state or federal action from “substantially burdening a person’s exercise of religion” unless the government demonstrates that its action furthers a “compelling governmental interest” and does so in the “least restrictive means” possible.

The district court also said the complaint over the Harris Funeral clothing allowance was improperly included in the EEOC complaint.

In a 49-page decision that echoed a recent Second Circuit decision concerning Title VII and sexual orientation, the unanimous Sixth Circuit panel reversed the district court on the transgender status issue and the RFRA. It said that discrimination based on transgender status is protected under Title VII and that Title VII did not “substantially burden” Rost’s exercise of his religious beliefs.

The three-judge panel included Judge Karen Nelson Moore and Helene White (Clinton appointees) and Bernice Donald (an Obama appointee).

“Discrimination on the basis of transgender and transitioning status is necessarily discrimination on the basis of sex,” wrote Judge Moore, “and thus the EEOC should have had the opportunity to prove that the Funeral Home violated Title VII by firing Stephens because she is transgender and transitioning from male to female.”

The panel relied heavily on the U.S. Supreme Court’s 1989 decision in Price Waterhouse v. Hopkins. That decision held that discriminating against an employee because the employee does not conform to gender stereotypes is a form of sex discrimination.

And the panel noted the Harris Funeral business was not affiliated with any church, that it operated on Christian holidays, that it serves and hires people of all faiths, and that it omits any religious figures from its rooms.

The panel also said the clothing allowance disparity was also properly before the court.

The panel decision sent the case back to the district court to determine whether the funeral home owner did, in fact, discriminate based on Stephens transgender status.

Alliance Defending Freedom, which is representing Harris Funeral, said it is deliberating over its options for appeal.

“American business owners, especially those serving the grieving and the vulnerable, should be free to live and work consistently with their faith,” said ADF’s McCaleb. The Stephens v. Harris Funeral decision, he said, “misreads court precedents that have long protected businesses which properly differentiate between men and women in their dress and grooming policies. Court opinions should interpret legal terms according to their plain meaning when Congress passed the law. This opinion instead re-writes federal law and is directly contrary to decisions from other federal appellate courts.”

Pizer, of Lambda Legal that submitted a brief in support of Stephens, said she thinks the Sixth Circuit panel decision “methodically considers and rejects the series of contorted notions that courts have used in the past to deny transgender workers the protections against sex discrimination that existing federal law should provide them.” And the panel’s analysis, she said, “is consistent with the important recent decisions from three federal appeals courts similarly confirming that discrimination against a worker for being lesbian, gay or bisexual necessarily takes that person’s sex into account, contrary to federal law.”

The three federal appeals court decisions are Hively v. Ivy Tech in the Seventh Circuit, Zarda v. Altitude Express in the Second Circuit (both decisions of the circuit’s full bench); and Franchina v. Providence (a decision of a First Circuit panel). The Seventh and Second circuits said Title VII bars sexual orientation discrimination; the First Circuit panel decision hinted that recent decisions by the U.S. Supreme Court and others might persuade the full First Circuit bench to rule that Title VII covers sexual orientation.

Shannon Minter, legal director for the National Center for Lesbian Rights, said the Stephens decision was the “first to reject a RFRA defense.”

And Pizer says that rejection couldn’t come at a better time.

“The Sixth Circuit makes it crystal clear:  the employer’s religious rights were not burdened by being required to treat Ms. Stephens equally at work. And even if there was a burden on those rights, our federal employment nondiscrimination serves compelling purposes in a proper way,” said Pizer. “This is consistent with decades of employment law and couldn’t be more timely, as we see President Trump’s Department of Justice arguing against civil rights protections for workers in Title VII cases and for customers seeking wedding-related services, and we see his Health and Human Services Department seeking to elevate religious rights over patients’ needs for quality medical care.  This decision shows why that thinking, as a general matter, is simply wrongheaded.  It couldn’t be more timely.”