Last month, Saks said that transgender employees are not covered under the ban on sex discrimination in Title VII of the Civil Rights Act of 1964. The company took that stance when it asked a judge in federal district in Texas to dismiss a lawsuit filed this fall by former selling associate Leyth Jamal, who claims she was harassed and retaliated against because of her transgender identity. Jamal said in her lawsuit that her coworkers at a Saks store in Houston referred to her as a man and forced her to use the men’s bathroom. A manager suggested that she make her appearance more masculine and “separate her home life from work life.” Saks fired Jamal in 2012 after she filed a discrimination complaint with the Equal Employment Opportunity Commission, according to the complaint.

In its defense, Saks argued that discrimination based on gender identity was not prohibited by federal law. The statement was in stark contrast to recent actions by the federal government advocating for the protection of transgender employees. In late December, Attorney General Eric Holder announced that, going forward, the Justice Department would consider discrimination against transgender people as covered by the Civil Rights Act’s prohibition of sex discrimination. Holder’s statement came a few months after the EEOC—the government agency that enforces the federal employment discrimination laws—filed its first-ever lawsuits to protect transgender workers under Title VII of the Civil Rights Act. And in July, President Barack Obama issued an executive order prohibiting federal contractors from discriminating against workers based on their sexual orientation or gender identity.

Saks then began to feel the heat from other corners of the legal world. In response to Saks’ filing in late December, New York Attorney General Eric Schneiderman sent a letter to Saks inquiring about its anti-discrimination policies for employees in New York. The Human Rights Campaign and National Center for Lesbian Rights chimed in with a court filing that said that Saks’ “position that Title VII does not protect transgender workers from the types of discrimination and harassment alleged in [Jamal’s] complaint is wrong as a matter of law.”

In response to the heightening backlash, Saks on Monday said that it would withdraw its December 29 filing that said that transgender employees were not protected from discrimination under Title VII.

Saks’ withdrawal came just before the Justice Department blasted the retailer in a filing on Monday. “Saks maintains that Ms. Jamal cannot prevail on a Title VII sex discrimination claim that is based on her gender identity, particularly her transgender status. Not so. Discrimination against an individual based on gender identity is discrimination because of sex.”

The retailer still plans to fight Jamal’s lawsuit on its merits. In a motion to withdrawal filed on Monday, Saks said that it is confident that, “as this matter proceeds, the facts will demonstrate that the plaintiff’s allegations are wholly without merit” and that “Saks did not discriminate against [her].”