This is a rush transcript from "On the Record," May 9, 2016. This copy may not be in its final form and may be updated.
GRETA VAN SUSTEREN, FOX NEWS HOST: A legal battle over a bathroom law. Now, it all began when North Carolina passed a law that requires transgender people to use the bathroom of the gender listed on their birth certificates.
That did not sit well with the United States Department of Justice. So, DOJ then fired off a letter to North Carolina Governor Pat McCrory insisting that the new North Carolina law violates the Civil Rights Act.
Justice gave North Carolina one week to confirm that it would not implement the new law.
Well, today is that one week mark. So, North Carolina, rather than agreeing with DOJ quickly filed a lawsuit against the Obama administration. And then in response, the DOJ filed their own federal lawsuit.
(BEGIN VIDEO CLIP)
LORETTA LYNCH, UNITED STATES ATTORNEY GENERAL: They created state-sponsored discrimination against transgender individuals who simply seek to engage in the most private of functions in a place of safety and security. A right taken for granted by most of us.
Last week, our Civil Rights Division notified state officials in North Carolina that house bill 2 violates federal civil rights laws. It was not so very long ago that states, including North Carolina had other signs above restrooms, water fountains and on public accommodations keeping people out based on a distinction without a difference. We have moved beyond those dark days, but not without a tremendous amount of pain and suffering.
(END VIDEO CLIP)
VAN SUSTEREN: North Carolina Governor Pat McCrory goes ON THE RECORD.
Good evening, sir.
PAT MCCRORY, NORTH CAROLINA GOVERNOR: Good evening.
VAN SUSTEREN: Governor, give me a little history on this. What provoked the law in the first place? Why did this get to be a topic?
MCCRORY: Well, this started with the political left. There was never any problem in North Carolina that we ever knew of. I think it really started in Houston, Texas about six months ago where they had a referendum on a bathroom mandate promoted by the political left and the voters rejected it 61 percent.
And then it came to Charlotte, North Carolina, where I used to be mayor for 14 years, and the new mayor there made a mandate on all private businesses that they must allow gender identity people and gender expression people to use the bathroom, restroom or locker room or shower of their choice in the private sectors as a mandate in fact with a fine.
And then what the state of North Carolina basically did is that was local government overreach. We do not want to be the bathroom police for the private sector in North Carolina. That's not our job. I have no interest in it.
But we did do this for high schools or junior highs or elementary schools or universities, highway rest stops and government buildings. We said you need to go to the restroom, locker room or shower, multi-use showers and so forth of what your biological is. And gender is. Based upon what the door says.
And next thing I know this has become a national issue. I'm being threatened by the federal government. Transportation funds, housing funds, university funds.
It's like Big Brother is all of a sudden descended upon our state in a very coordinated political way. But, actually, what the attorney general -- what the national media is missing, this is no longer a mandate on North Carolina.
They are making bathroom rules for every employer in the United States of America with over 15 employees and telling them that they must allow gender identity to be the new choice of what restroom or shower people use at a place of work.
VAN SUSTEREN: All right. The bathroom is obviously the issue that has really captured everybody's attention.
There are also, as I understand it, about 17 ordinances in this law, parts of this law that remove some discrimination against gay people.
First of all, am I correct that there's some -- that's not correct?
MCCRORY: No. That's not correct.
Now, Charlotte did pass an ordinance regarding gay and lesbian and transgender and gender expression. And the state legislature did not want every city and town to have their own discrimination clauses, but that should be state-wide.
We didn't eliminate anything that any city didn't have prior to that Charlotte overreach. In fact, I firmly believe that the federal government does need to deal with this discrimination issue.
I think the U.S. Congress needs to further clarify, not only sexual orientation being a protected class, but we need to figure out what gender identity and gender expression is.
And the U.S. Congress kind of ignored it. And now the Obama administration is interpreting existing law, the word "sex" has now become not just sexual orientation, but also gender identity and gender expression.
This is an issue none of use were talking about. I never talked about it during any campaign. I didn't even know this problem existed up until several months ago.
VAN SUSTEREN: Now, do you believe, I'm trying to get your side here -- do you believe that companies should be able to fire people because they are gay?
MCCRORY: Absolutely not.
VAN SUSTEREN: OK.
MCCRORY: In fact, I have signed an executive order, I'm totally against any discrimination towards sexual orientation whatsoever. The big issue for us is what is the definition of gender identity or gender expression, especially when you are using a group shower or group locker room or group restroom.
VAN SUSTEREN: Is this -- OK, now, this is in court. You are in court. The federal government.
Is this something that really -- I mean, we are going back to the Civil Rights Act. Is this really something that Congress sort of needs to define so that there is direction to the states?
I mean, the problem is that both of you are suing each other. But, you know, the 1964 Civil Rights Act didn't speak to this. And maybe it's time for Congress to figure it out.
We do not need different anti-discrimination rules in every city and state and small town and county throughout the United States of America. And that's what we have right now.
In fact, most states have the same rules as North Carolina, but they may have pockets of one city has one rule. New York, I think, has 30-some different classifications. This is a federal issue by, you know, since the LBJ days from 1964 Civil Rights Act.
And Congress has frankly ignored this, both Republicans and Democrats. They need to revisit what is the definition of sex?
VAN SUSTEREN: Well, don't count on them doing it during a political year.
MCCRORY: No, I don't.
VAN SUSTEREN: All right, let me ask you about this then.
What -- have you figured out the cost? Because I know that you have had like Bruce Springsteen cancelled a concert and have had others.
You've got PayPal that was going to expand its business into North Carolina.
Have you put a dollar figure on this so far as to the impact?
MCCRORY: It's hard to do. We've lost one company. PayPal had a call center in the Charlotte region that they cancelled.
By the way, with all due respect to PayPal, they do business in China, in Russia, Sudan, Iran. In fact, they were fined for doing that, where, you know, if someone's sexual orientation is gay or lesbian, they're killed or they are imprisoned. And this is a bathroom rule in North Carolina, where people are concerned. It's an expectation of privacy that people have when they go to a highway rest stop and they go -- they think -- the people coming into that multifunction area are people of their own gender.
So it's a feeling of security and privacy. And, frankly, I think Congress does need to deal with this and we need to have a consistent application across the United States.
VAN SUSTEREN: Governor, thank you for joining us, sir.
MCCRORY: Thank you very much, Greta.