In a decision hailed as an important victory for the transgendered, the tribunal found the province's "transsexual surgery" requirement to be discriminatory.
According to the tribunal, the surgery requirement further stigmatizes transsexuals and reinforces stereotypes that they can only live in their "felt gender" if they have had an operation.
The tribunal ordered the province to scrap the surgery requirement and come up with new criteria for changing gender on birth certificates within six months.
Lawyer Susan Ursel, who represented a born-male woman known as XY, said on Friday that the current system is profoundly intrusive.
"They're requiring you to surgically change some aspect of your body in order to get a letter changed on a piece of paper," Ursel told The Canadian Press.
She expressed delight with the ruling, calling it an important step toward better understanding of transgendering.
A spokeswoman for Government Services Minister Harinder Takhar said he had directed officials to review the binding ruling and its implications.
"That review is currently taking place," Marie-Andree Bolduc said.
One alternative for birth certificates could be the process already in place for making gender changes on Ontario's driver's licences. The Transportation Ministry simply requires a doctor to certify — without elaboration — that a person is an "appropriate candidate" for the gender-designation change.
Such a decision could be based on several factors including a physical sex change, but the ministry does not require surgery as the birth registry does.
"This decision is a welcome step forward in recognizing and promoting the dignity and equality of trans people," Chief Commissioner Barbara Hall in a statement.
Many in the transgendered community may not be able to have surgery for physiological reasons, or they may not want it because, for example, they may want to have children.
Ursel said the transgendered face "significant" discrimination when it comes to jobs and housing, and are frequently victims of violence.
The recent headline-making case of beauty queen Jenna Talackova, who was booted from the Miss Universe pageant because she was born male, was a high-profile example of such discrimination, the lawyer said.
"That's exactly the kind of problem that manifests itself," Ursel said.
"(Talackova) is to all intents and purposes, in her mind and in her social presentation and how she lives her life, a woman."
The Vancouver beauty queen was reinstated in the Miss Universe contest after an outcry.
The Ontario Human Right Commission had previously taken the position that gender identity should be recognized based on "lived identity," and not depend on a surgical procedure, a view the tribunal has now upheld.
The tribunal said no harm would come to the Vital Statistics Act by making the change.
It also ordered the Ministry of Government and Consumer Services to publicize the changes.
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