The 11th Circuit Court of Appeals recently released its decision in the case of Myers v. TooJay's Management Corporation. Myers filed for bankruptcy in North Carolina in January, 2008. The next month, he moved to Florida "looking for a fresh start and found work as a shift supervisor at a Starbucks coffeehouse." In May, 2008, his debts were discharged by the Bankruptcy Court. Several months later, Myers interviewed with the regional manager of TooJay's, seeking a managerial position at a local TooJay's restaurant. He had a successful interview, and was offered a 2 day on the job evaluation, wherein he was paid $100/day. Myers testified that the on the job evaluation "was just so that we could both get a feel for the restaurant, that I would make sure I was comfortable doing it there, that [the regional manager] was comfortable with me and the other restaurant managers were comfortable with me." Following the on the job evaluation, TooJay's conducted a consumer background check, determined that he had filed bankruptcy, and withdrew it's job offer since the company had a policy of not hiring individuals who filed bankruptcy. After a jury trial, the jury determined that Myers was never employed at TooJay's, and found in favor of TooJay's.
On appeal, the 11th Circuit examined 2 provisions of the Bankruptcy Act:
Section 525(a) which reads in pertinent part: "A governmental unit may not...deny employment to, terminate the employment of, or discriminate with respect to employment against a person that is or has been a debtor under this title or a bankrupt or a debtor under the Bankruptcy Act..."
Section 525(b) provides in pertinent part: "No private employer may terminate the employment or, 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..."
Since the language of the Bankruptcy Act is clear and unambiguous that the denial of employment based on bankruptcy applies only to a governmental entity, and TooJay's was a private entity, the Court found, consistent with the 3rd and 5th Circuits, that private employers are not prohibited from denying employment to applicants if they filed for bankruptcy.
Practice pointer. Private employers may not discriminate against any current employee if he/she files bankruptcy. Doing so may result in liability under Section 525(b).