And I'm always surprised when I teach classes on EEO and discrimination issues, and we talk about discrimination based on gender identity, that my students mostly want to talk about bathrooms.
While there is a plethora of interesting case law and issues about discrimination in employment based on how we perceive someone's gender - such as whether we think they look the way we think a man or a woman should look - people instead want to talk about bathrooms. If you want an entertaining take on the transgender bathroom issue, listen to Garrison Keillor's recent discourse on Prairie Home Companion. http://prairiehome.org/shows/april-2-2016/
While I'm not taking sides in the political debate, and the law is still being sorted out, most courts who have considered the issue - as well as the EEOC - have taken the view that people should be allowed to use the bathroom that corresponds with the gender they identify with, meaning whether they perceive themselves to be male or female. http://www.lambdalegal.org/know-your-rights/transgender/restroom-faq
While most of these decisions have focused on state laws, I feel confident that EEOC and federal court decisions will eventually trump all that. Basically, the federal and most state courts have held that you cannot discriminate based on illegal sexual stereotypes, protecting transgender people from discrimination based on the theory that you are discriminating based on a stereotype if you treat them differently.
Even though transgender employees may be a small percentage of the population, it is important to remember that sexual stereotypes are common and that they are illegal. Managers and employees should be trained to avoid them. Comments such as "she doesn't look like a woman, she doesn't dress like a woman, she doesn't walk like a woman", or conversely, "he looks more like a girl than a boy" are harmful comments where managers should intervene and employees who are bystanders should be encouraged to speak up.
Some discussions of the bathroom issue have wanted to focus on whether someone has made the transition from their gender at birth by having reassignment surgery. You can only imagine what an invasion of privacy it would be to do "genital checks" of everyone in the workplace! In addition, many of the discussions have avoided the reality that bathroom issues affect people with disabilities, since not all bathrooms are accessible. Likewise, people with small children encounter issues when deciding which bathroom is appropriate to utilize.
Some debaters express concern about the safety of women and girls, yet there is little actual evidence of transgender employees attacking women, nor of men dressing up as women in order to assault women.
While this issue may not affect every employer, the reality is that most employers are able to work things out by allowing people to use the restroom assigned to the gender they identify with, creating unisex restrooms or accommodating objecting employees by allowing them access to a private restroom.