A federal court in the U.S. state of Michigan ruled last week in favour of a funeral home sued by the state for dismissing a transgender employee who wanted to wear women's clothes at work.

In his ruling, Judge Sean Cox of the U.S. District Court in the Eastern District of Michigan said there was no discrimination when R.G. & G.R. Harris Funeral Homes fired funeral director and embalmer Anthony Stephens, aka Amiee Australia Stephens, in August 2013 for refusing to abide by the business' sex-speciic dress code.

After he was fired, Stephens filed a discrimination complaint with the Michigan Equal Employment Opportunity Commission, which then lodged a civil action against the funeral home on his behalf.

The court said the funeral home is entitled to exemption under the Religious Freedom Restoration Act (RFRA) that protects the freedom of a business to implement a dress code consistent with its sincerely held religious beliefs.

"The feds shouldn't strong-arm private business owners into violating their religious beliefs, and the court has affirmed that here," said Alliance Defending Freedom (ADF) legal counsel Doug Wardlow, who argued for the funeral home in court on Aug. 11.

Funeral directors, the ADF said, regularly interact with the public including grieving family members and friends.

Stephens was dismissed when he told the funeral home in July 2013 that he was going back to work dressed as a woman.

"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. At the end of my vacation on August 26, 2013, I will return to work as my true self, Amiee Australia Stephens, in appropriate business attire," he wrote.

The court acknowledged that the owner of the funeral home, Thomas Rost is a Christian whose faith governs the way he operates his business and how he presents it to the public.

It said the funeral home did not violate Title VII, a federal law which prohibits sex discrimination in employment and is protected under RFRA.

"The Court finds that the Funeral Home has met its initial burden of showing that enforcement of Title VII, and the body of sex-stereotyping case law that has developed under it, would impose a substantial burden on its ability to conduct business in accordance with its sincerely held religious beliefs," the court wrote.

It added, "Rost sincerely believes that it would be violating God's commands if he were to permit an employee who was born a biological male to dress in a traditionally female skirt-suit at the funeral home because doing so would support the idea that sex is a changeable social construct rather than an immutable God-given gift."