Labor & Employment Law

Protecting debtors from failure to hire, promote or termination after filing bankruptcy

By Michael Goldstein, Esq.

The stigma of filing bankruptcy has stopped many debtors who rightfully and propably necessarily need to file bankruptcy. The truth of the matter is that filing bankruptcy is a right granted to all Americans by Congress and as such, is a protected right. As a protected right, it is illegal to discriminate against debtors as employees pursuant to both Massachusetts law, MGL 151B, and Federal Law (Civil Rights Act and Bankruptcy Code). More specifically, 11 U.S.C.A § 525(b) provides, ?No private employer may terminate the employment of, or discriminate with respect to employment against, an individual who is or has been a debtor under this title, a debtor or bankrupt under the Bankruptcy Act, or an individual associated with such debtor or bankrupt, solely because such debtor or bankrupt”.

There has been several cases directly on-point with the forgoing. In one case, a Police department rule rendering a city policeman subject to dismissal for the filing of a petition in bankruptcy was unconstitutional under U.S.C.A.Const. Art. 6, cl. 2, since the rule, while intended to insure a reliable and respectable police force, had the effect of prohibiting a policeman burdened with staggering debts from obtaining ?a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of pre-existing debt?, an effect in direct contravention of the stated purpose of this title. Rutledge v. City of Shreveport, W.D.La.1975, 387 F.Supp. 1277.

Chapter 13 debtor, a former chief appraiser for a county tax appraisal district, was fired from her job in violation of the Bankruptcy Code’s antidiscrimination provision where it was apparent from the totality of the circumstances that appraisal district’s board of directors determined that debtor would be discharged because they were embarrassed that she had filed bankruptcy and that it had become public knowledge. In re McKibben, Bkrtcy.E.D.Tex.1999, 233 B.R. 378.

Pursuant to Federal and state law, it is also a violation of law to either refuse or fail to promote or hire an employee based upon their status as a bankruptcy filer. In one case, an employer’s failure to offer participation to debtor in commission advancement program after debtor had filed for bankruptcy, when all other account specialists were offered participation, violated antidiscrimination provision of Bankruptcy Code, where determining reason for failing to offer participation to debtor was fact of his bankruptcy. In re Vaughter, bkrtcy.W.D.Tex.1989, 109 B.R. 229.

Full post as published by Massachusetts Employment Law Blog on August 11, 2008 (boomark / email).