There are no federal laws prohibiting sexual orientation discrimination. However, states may adopt such laws, as California has done. It is illegal in California for an employer to discriminate against an employee because of that employee's sexual orientation or perceived sexual orientation. Same-sex sexual harassment may also be sexual orientation discrimination.
Under California law, it is illegal for an employer to fire an employee because he believes the employee is gay, whether or not the employee is actually gay. The employee must make a complaint to the California Labor Commission no more than 30 days after he or she is discriminated against. Only after the Labor Commission has processed the claim may the employee sue in court.
The law against sexual orientation discrimination is very new, so the damages that can be received in court are not clearly defined. However, it appears that employees can recover their lost wages and other benefits, emotional distress damages, and punitive damages. Whether or not they may recover attorneys fees and costs has not yet been established.