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I think you're correct in your definition of business casual... at my last internship, I had asked what the dress is and my boss said business casual... but all the guys, including him, walked around in button down shirts and ties and dress slacks.
As for women, business casual spans the spectrum I guess... I've always been more of a dress-up girl, but my co-workers will come in with sneakers, even my boss... not gym sneakers, but Diesels or ones that look dressier.
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