The U.S. Justice Department said on May 4 that the North Carolina law known as the "bathroom bill" violates the Civil Rights Act.
The department sent a letter to the state's Republican Gov. Pat McCrory which put the state on notice that it could be sued, which would cause the state to lose hundreds of millions of dollars in federal funding, according to the Associated Press.
"The State is engaging in a pattern or practice of discrimination against transgender state employees and both you, in your official capacity, and the state are engaging in a pattern or practice of resistance" of their rights, the letter reads, according to AP.
Pro-LGBT rights groups, businesses and entertainers have spoken out against the hotly debated law, which requires transgender people to use public bathrooms conforming to the sex on their birth certificate and in some cases limits anti-discrimination protections. Businesses like PayPal have moved expansions planned for North Carolina elsewhere, while many performers have canceled shows in the state.
While the Justice Department's letter does not assert any legal weight, it has warned the state government that they are on notice and could face a lawsuit in the near future for violating federal civil rights laws.
In the letter, the Justice Department requested acknowledgement by May 9 that "the State will not comply with or implement H.B. 2, and that it has notified employees of the State and public agencies that, consistent with federal law, they are permitted to access bathrooms and other facilities consistent with their gender identity."
But supporters of the law, including McCrory, say that restrictions on the bathroom bill exemplify federal government overreach by forcing North Carolina to adopt a liberal agenda, notes the Charlotte Observer.
"This is no longer just a N.C. issue," McCrory said, according to the Observer. "This impacts every state, every university and almost every employee in the United States of America. All those will have to comply with new definitions of requirements by the federal government regarding restrooms, locker rooms and shower facilities in both the private and public sector."