Bruce Jenner just announced "For all intents and purposes, I'm a woman." Now, as much fun as it is to discuss this on a gossipy level and get quotes from his Kardashian step children, what if Jenner were your employee? When a biological male announces that he intends to live life as a she, how does that affect your workplace? Getting it wrong can land you in court. Here's what you need to know:

Transgender isn't a protected class...but: Federal law doesn't offer special protection to people based on their transgendered status, but federal law does prohibit discrimination based on something called "gender stereotypes." This means, if Jenner were your employee and now he wants to start wearing makeup and dresses to work, you can't fire him because men don't wear makeup. That's a gender stereotype.

The EEOC recently settled a lawsuit with Lakeland Eye Clinic based on this very concept.

The EEOC's lawsuit charged that Lakeland Eye Clinic discriminated based on sex by firing its Director of Hearing Services after she began to present as a woman and informed the defendant that she was transgender, despite the fact that the employee had performed her duties satisfactorily throughout her employment. The complaint alleged that the action was taken because the former Director was transgender, transitioning from male to female, and because she did not conform to the employer's gender-based stereotypes.

What about bathrooms? The EEOC just ruled against the US Army for not allowing a transgendered employee to use the bathroom matching her new identity. The Army had argued that they had valid reasons to make Tamara Lusardi use a single person bathroom--her presence in the women's bathroom made other employees uncomfortable. Not a valid reason, said the EEOC commission. They said, in the ruling:

We recognize that certain employees may object--some vigorously--to allowing a transgender individual to use the restroom consistent with his or her gender identity. But supervisory or co-worker confusion or anxiety cannot justify discriminatory terms and conditions of employment.

The courts haven't consistently ruled on this issue. In 2001, the Minnesota Supreme Court ruled that an employer could require employees to use bathrooms based on their biological gender. If you want to follow this court's example, you may find yourself in hot water with the EEOC and the federal courts, which I suspect will continue to include Transgender discrimination as gender stereotype discrimination.

He, she or it? Another aspect of Lusardi's case was that management continued to use male pronounces to refer to Lusardi and, in some cases, switched to "it" instead. The proper thing to do is to refer to the person by their gender identity. Remember, you don't need a court ruling to simply be nice to someone. He or she, based on gender identity, will do just fine.

Remember state and local laws apply as well. You can't just base your policies around federal law. State and local laws can be stricter and offer more protections to transgendered employees. You need to make sure your practices conform with all applicable laws.

It's all about performance. Your evaluation of an employee should not be based on anything other than their performance. Always. If you ever start making employment decisions based on anything else, you aren't looking out for the good of your business and you may find yourself in hot water. If an employee comes to you and says he wants to transition to she (or the other way around), you can work with that employee to come up with a plan that will ensure comfort. Dr. Jillian Weiss has a sample letter for employers to send to the other employees when an employee is transitioning.

If you are confused on what to do, check with your employment lawyer. Every company should have an established relationship with an employment lawyer. If you don't, do so now, before you need advice. To make sure you're not violating any laws, double check that your policies and practices are up to date and legal.