By Daniel Wiessner and Sarah N. Lynch

(Reuters) - The U.S. Department of Justice has reversed course on whether federal law banning sex discrimination in the workplace provides protections for transgender employees, saying in a memo that it does not.

The memo sent to U.S. Attorneys' offices on Wednesday by Attorney General Jeff Sessions says Title VII of the Civil Rights Act of 1964 only prohibits discrimination on the basis of a worker's biological sex, and not their gender identity.

Sessions rescinded a Justice Department memo from 2014 that said Title VII does protect transgender people, a position also taken by several federal appeals courts in recent years.

It was the Trump administration's latest move to roll back Obama administration policies on LGBT issues. In August, President Donald Trump signed a memo directing the U.S. military not to accept transgender men and women as recruits, reversing a policy that allowed transgender people to serve openly.

And last month, the Justice Department appeared before a federal appeals court in Manhattan to argue that Title VII does not provide protections to gay and lesbian workers.

The Democratic National Committee criticized Wednesday's memo in a statement, and urged Congress to pass a law explicitly protecting LGBT workers from discrimination.

Department of Justice spokesman Devin O'Malley said in a statement on Thursday that the government could not expand the law beyond what Congress had intended.

"Unfortunately, the last administration abandoned that fundamental principle, which necessitated today's action," he said.

But Sharon McGowan of LGBT group Lambda Legal, who worked at the Justice Department during the Obama administration, said the memo "blatantly ignores" a growing body of court decisions that said discrimination against transgender people is a type of sex bias.

"We are confident that the courts will see this flip in position for what it is - an anti-LGBT political pronouncement that finds no support in the law," she said.

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All three federal appeals courts to consider the issue over the last two decades have said discrimination against transgender workers is unlawful.

Most recently, an appeals court in Atlanta in 2011 said the Georgia state legislature unlawfully fired a transgender woman after she told her supervisor she planned to transition from male to female.

(Reporting by Daniel Wiessner in Albany, New York and Sarah N. Lynch in Washington; Editing by Alexia Garamfalvi and Bernadette Baum)