Victor Fraile / Reuters

It is perfectly legal for a conservative Christian business owner to fire a transgender employee simply because the person wants to “dress as a woman.”

That’s what a Michigan district court said in a summary judgment against the Equal Employment Opportunity Commission issued Thursday, ruling that a Baptist, family-owned funeral home had the right to dismiss a former funeral director, Aimee Stephens, who was starting to transition from male to female.

This decision is the latest in a confusing body of rulings about what constitutes sex discrimination in workplaces, which is prohibited under Title VII of the Civil Rights Act of 1964. It’s also a powerful reminder of how tenuous transgender rights currently are in the United States. But above all, the reasoning in the decision suggests that the powerful effects of the Supreme Court’s 2014 decision in Burwell v. Hobby Lobby are starting to emerge. While the court’s logic wouldn’t apply to other kinds of discrimination outlawed by Title VII—on the basis of race or national origin, for example—it could apply to future cases of alleged discrimination based on gender identity and sexual orientation.

According to the Michigan ruling, which cited Hobby Lobby, the federal Religious Freedom Restoration Act protects employers who believe “the Bible teaches that it is wrong for a biological male to deny his sex by dressing as a woman.” Not only do transgender people have no protection against this kind of discrimination under federal law, the court said; if the government forces employers to keep them on in spite of their stated religious beliefs, that places a “substantial burden” on their religious exercise. This is a new kind of ruling, according to Michael Harper, a professor at Boston University, and one that could have far-reaching consequences if other courts follow the same logic.

Here’s what happened in the case. In 2013, Stephens decided she wanted to make a gender transition. She wrote a letter to Thomas Rost, her boss, saying:

I have a gender identity disorder that I have struggled with my entire life. I have managed to hide it very well all these years ... It is a birth defect that needs to be fixed. I have been in therapy for nearly four years now and have been diagnosed as a transexual. I have felt imprisoned in my body that does not match my mind, and this has caused me great despair and loneliness. With the support of my loving wife, I have decided to become the person that my mind already is. I cannot begin to describe the shame and suffering that I have lived with. Toward that end, I intend to have sex reassignment surgery. The first step I must take is to live and work full-time as a woman for one year. ...

I realize that some of you may have trouble understanding this. … It is my wish that I can continue my work at R.G. & G. R. Harris Funeral Homes doing what I have always done, which is my best!

Rost fired Stephens. In a deposition, Rost testified that he did so because Stephens “was no longer going to represent himself as a man. He wanted to dress as a woman.” In response to Stephens’s complaint with the EEOC, Rost’s legal team made two arguments in his defense: First, that the funeral home has a sex-specific dress code which it feels mission-bound to enforce; and second, that keeping Stephens on would violate Rost’s Baptist beliefs.

The district court rejected the argument about the dress code, but it accepted the argument about Rost’s religious beliefs. That reasoning shows why this case is so significant.

First, to the dress code. For at least the past two years, the court system and government have effectively been in an all-out war over the meaning of “sex discrimination” in Title VII. The EEOC, a government agency which resolves disputes for federal employees and can bring cases on behalf of private employees, has ruled that the term “sex includes both gender identity and sexual orientation, meaning that LGBT people can’t be fired because of how they dress or act or who they have sex with. The Obama administration largely agrees: Last spring, for example, the Department of Health and Human Services quietly expanded its official interpretation of “sex discrimination” in several federal statutes to include gender identity, and made tentative moves toward including sexual orientation, as well.

But so far, the courts have disagreed. None of the circuit courts have ruled that “sex discrimination” can extend to sexual orientation, and the body of law on how that prohibition might apply to gender identity is contradictory and mixed. While some lower courts have accepted the logic of the EEOC and other legal advocates who say the law already fully protects LGBT employees from discrimination, the higher courts have not—and the Supreme Court has not yet ruled definitively on the issue.

The reason why the court system is in such confusion is that discrimination against LGBT employees is not explicitly outlawed by federal law, and while some  states and localities outlaw anti-LGBT discrimination, others don’t. Michigan, for example, does not have any state law that outlaws employment discrimination against LGBT people—it’s perfectly legal in the state to fire someone because of their sexual orientation or gender identity. In the absence of clear federal legislation on this issue, courts and agencies have been left to fight it out over the words that are included in federal law—namely, what the meaning of “sex” in “sex discrimination” is.

This has become an increasingly difficult problem since the Supreme Court ruled in favor of same-sex marriage last summer. Since more LGBT people can now get married, that means more people are seeking marital benefits and coming out at work, giving employers more opportunities to discriminate. But it’s been a confusing legal issue for a long time. Twenty-seven years ago, the Supreme Court did rule on one aspect of gender identity discrimination: It said that employers can’t force workers to express their femininity or masculinity in a certain way as a basis for promotions or continued employment. What that has meant, as the Seventh Circuit recently noted, is that someone can win a discrimination case if her boss fires her because of her butch haircut, but not if her boss fires her for being a lesbian.

Along those lines, the district court in the Michigan funeral home case didn’t accept the argument that the owner should be able to enforce its gendered dress code. But it also didn’t accept the EEOC’s longstanding argument that gender-identity discrimination is forbidden by Title VII. And that opened the way for the second, more significant part of the court’s decision: If the government forced the funeral home to keep Stephens on as an employee, that would place a substantial burden on the owner’s religious beliefs.

According to the decision, the funeral home “‘administers its dress code based on our employees’ biological sex, not based on their subjective gender identity.’” The owner, Rost, believes “‘the Bible teaches that a person’s sex is an immutable God-given gift and that people should not deny or attempt to change their sex.’” Because of this, Rost says, he “‘would be violating God’s commands’ if he let Stephens ‘deny [his] sex while acting as a representative of [the funeral home].’”

Following the logic of Hobby Lobby, the court ruled that a private business can make this kind of claim about religious conscience. While the EEOC argued that the funeral home should have to allow Stephens to dress according to her gender identity, the court argued that this wasn’t the least restrictive way for the government to protect against the alleged discrimination—the agency could have proposed that the funeral home create a neutral dress code, for example.

If this seems like these legal arguments are missing the deeper point, that’s because they are. At its core, this case is not about someone being fired because of a dress code; it’s about someone being fired because she is transgender. It also validates a new way of using the Religious Freedom Restoration act—the court has effectively affirmed that religion can be a legitimate justification for firing a transgender person.

But because of the way the law is written, and because of the confusing set of court precedents in this area, the case had to be litigated as a matter of skirt suits. What may be coming next is more cases of people claiming they have a right to fire LGBT people as a matter of faith.

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