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After graduating from Carleton University in 1985, Douglas joined the Canadian Forces in 1986, and was soon promoted to the Special Investigations Unit. In 1989, however, she came under investigation and was honorably dismissed because she is a lesbian. This, despite having an exemplary service record and repeatedly being at the top of her class. She was dismissed under administrative release item 5d: "Not Advantageously Employable Due to Homosexuality".
Douglas subsequently launched a court challenge where she was represented by Clayton Ruby. In October, 1992, just before Douglas' legal challenge went to trial, the Canadian military abandoned its policy banning gays and lesbians and settled the case. This ended Canada's policy of "Don't Ask, Don't Tell".
Douglas went on to be the founding president of the Foundation for Equal Families. She later served at Chair of the Board of The 519 Community Centre in Toronto. Since 2005, Douglas has served on the Canadian Board of Directors of Free the Children.