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Enterprise Risk

The ‘bathroom bill’ and a costly lesson on discrimination

Tiffany Robertson

21 Apr 2017

Discrimination. Members of the black community shout out their opposition to North Carolina's HB2 "bathroom law" that restricts members of the LGBT community from using the bathroom of their choice, during a demonstration inside the state legislature in Raleigh, North Carolina on May 16, 2016.
Members of the black community shout out their opposition to North Carolina’s HB2 “bathroom law” that restricts members of the LGBT community from using the bathroom of their choice. Photographer: Jonathan Drake

North Carolina’s so-called ‘bathroom bill’, which drew fire for limiting LGBT protections, highlights the financial consequences when an organization condones discrimination.

The North Carolina House Bill 2 (HB2) attracted furious protests when it excluded gender identity and sexual orientation from state-wide anti-discrimination protections.

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Furthermore, it specifically provided that transgender people may only use public locker rooms or restrooms corresponding to the sex indicated on their birth certificates.

In response, numerous state governors banned government employees from all non-essential travel to North Carolina, with losses directly attributable to organizations and individuals opting not to do business or hold events in the state estimated at nearly US$4 billion by 2028, according to analysis by AP News.

The controversy recently led lawmakers to repeal the bill, although campaigners said replacement legislation still failed to protect the LGBT community.

Discrimination. Bathroom bill LGBT protections
Lawmakers confer during a negotiations on the floor of North Carolina’s State Senate chamber as they meet to consider repealing the controversial HB 2 law limiting bathroom access for transgender people in Raleigh, North Carolina, U.S. Photographer: Jonathan Drake

Diversity education

HB2 has been a perfect example of the reputational harm — and the resulting financial impact — that can follow when an organization (or state) condones discrimination.

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Employers can avoid such ramifications by educating their workforce on the importance of diversity and the laws and regulations that prohibit certain conduct.

Thomson Reuters online Preventing Discrimination and Harassment training helps minimize the risk of similar repercussions by highlighting the importance of equality and acceptance in the workplace, as well as the type of conduct that can lead to liability.

Loss of business

The AP analysis delved into the long-term financial impact of the law, using data from interviews and public records requests in an attempt to pinpoint projects cancelled or business relocated because of HB2.

Overall, while most large companies with existing operations remained in the state, it was far easier for those not already doing business there to avoid the issue.

Among the projected lost revenue (including an estimated $525 million by the end of 2017):

  • Withdrawal of planned PayPal facility ($2.66 billion)
  • Cancelled Deutsche Bank project ($543 million)
  • Other large companies opting not to build factories or initiate business ($369 million)
  • Cancelled conventions, concerts and sporting events ($196 million)

Asset management impact

The figures don’t take into account every loss, however.

For example, the impact of dozens of wealthy families and foundations requesting that their asset management company exclude bonds issued by North Carolina state or municipal governments from their holdings.

Furthermore, there is no way to determine losses due to businesses, organizations and individuals that now exclude North Carolina from their options because of the law.

While it may sound like a big loss, the estimated $3.76 billion is only a small proportion of North Carolina’s $500 billion total annual economy.

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Discrimination shield

HB2 supporters maintained that the state can absorb such losses, particularly if sexual predators cannot pose as transgender people to molest women and girls.

The law’s detractors asserted that the chance of such acts taking place was so small as to be imagined.

Whether the law prevents crime or not, or if lawmakers repeal the legislation, the state cannot recoup financial losses stemming from business or events already established elsewhere.

Compliance benefits

North Carolina’s situation highlights the perils of ignoring the social climate and condoning discrimination and harassment.

On the other hand, policies that prohibit discrimination based on sexual orientation and/or gender identity not only limit liability, but keep a company competitive and help retain quality talent by showing employees it values workplace equality.

Compliance training, with Thomson Reuters online courses on Inclusion and Diversity and Preventing Discrimination and Harassment, is an easy and effective way to impart the importance of compliance and ensure employees understand how to recognize, avoid and respond to improper conduct in the workplace.


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