Justice Department: North Carolina LGBT law violates civil rights

Last Updated May 4, 2016 7:10 PM EDT

RALEIGH, N.C. -- A North Carolina law that limits protections to LGBT people violates federal civil rights laws, the U.S. Department of Justice has determined.

A letter from the Justice Department to North Carolina Gov. Pat McCrory, obtained by CBS News, said the law violates Title IX of the Civil Rights Act, which bars discrimination in education based on sex. That could lead to North Carolina losing hundreds of millions of dollars in federal school funding.

The DOJ has given the state until May 9 to "determine whether you will remedy these violations" by not implementing or complying with the law called House Bill 2, or HB2.

Wednesday evening, McCrory issued a statement saying North Carolina would review the DOJ order "to determine the next steps."

"The Obama administration has not only staked out its position for North Carolina, but for all states, universities and most employers in the U.S.," McCrory said. "The right and expectation of privacy in one of the most private areas of our personal lives is now in jeopardy."

The North Carolina legislature passed HB2 in a day, but the passing of the bill has drawn national response,CBS affiliate WNCN reported.

The law blocks local and state protections for lesbian, gay, bisexual and transgender people and directs which restrooms transgender people can use in public buildings.

It has been the subject of protests at the statehouse, both against and in favor of the policy.

"HB2 compounds the discrimination and marginalization of the transgender community, who already have to fight every day for their survival," said Joaquin Carcano, a transgender man who's suing over the law. "Our privacy and safety matter too. Our right to feel safe and protected in this world does not infringe on anyone else's right to the same."

The head of the state NAACP, the Rev. William Barber, called the law "Hate Bill 2." He said it affects the poor and minorities as well as the LGBT community, despite conservative efforts to depict it as a law focused on bathroom safety.

"We make a mistake when we call it the 'bathroom bill,'" he said at a demonstration late last month in Raleigh, WNCN reported. Barber called the legislation an anti-living wage bill.

"It's an anti-worker bill. It's an anti-family bill. It's an anti-civil rights protection bill. It's an anti-gay bill," he said.

Businesses in the capital have already lost more than $700,000 from cancelled events. Another 16 groups are considering cancellations, worth about $24 million, according to the state's tourist board.

Deutsche Bank and PayPal have frozen their plans to create 650 new jobs, and other corporations have curtailed their business in the state. Several states have banned public employees from traveling to North Carolina on official business.

Bruce Springsteen, Mumford and Sons, Pearl Jam, Blue Man Group and Cirque du Soleil have all cancelled performances in North Carolina since the law was passed last month.

Republican legislative leaders have expressed no interest in overturning the new law. GOP lawmakers have focused their discussion of the law on provisions requiring transgender people to use multi-stall restrooms that align with their gender at birth.

A Justice Department official told CBS News' Paula Reid if North Carolina refuses to adhere to Title IX voluntarily, the DOJ could sue the state to force it to comply or lose federal funding.