Private Employer Can Deny Employment to Applicant Who Filed Bankruptcy

Posted on May 20, 2011 by Daniel Burnick

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). 

Tags: , ,

11TH CIRCUIT FINDS FAILURE TO DISCLOSE TITLE VII LAWSUIT IN BANKRUPTCY PROCEEDINGS BARS CLAIM

Posted on February 9, 2010 by Daniel Burnick

On February 5, the 11th Circuit decided the case of Robinson v. Tyson Foods.  Robinson worked for Tyson Foods, and resigned in September, 2005 by a letter of resignation stating, in part, that she was subjected to "harassment, racial abuse and intimidation."  In October, 2006, she brought a civil suit against Tyson under Title VII, and claimed compensatory, punitive and liquidated damages.  In April, 2002, Robinson voluntarily dismissed her Chapter 13 bankruptcy cased because she could not make her payments, and filed a second Chapter 13 proceeding.  The plan was confirmed in May, 2002, and the judge ordered, in part, that "the property of the estate shall not vest in the Debtor until a discharge is granted under Section 1328 or the case is dismissed".  In May, 2007, one of Robinson's debtors moved to dismiss the bankruptcy plan because her payments were delinquent.  Before a hearing on the motion, she became current on her payments. In July, 2007, her bankruptcy plan was completed, she repaid all her debts, and she received a full discharge from Bankruptcy.

Tyson took her deposition in September, 2007, and learned that she had not disclosed her suit against Tyson in the bankruptcy court.  Tyson also learned that her husband died in 1997, and she had a workers' compensation claim against her husbands employer when she declared bankruptcy in April, 2002.  That lawsuit was not disclosed either.  The 11th Circuit upheld the trial courts decision dismissing Robinson's claim against Tyson, under the theory of judicial estoppel, which is designed to "prevent a party from asserting a claim in a legal proceeding that is inconsistent with a claim taken by the party in a previous preceding".  Since full and honest disclosure in a bankruptcy proceeding is "critical" to the effective functioning of the system, and a debtor has a statutory duty to disclose all assets, or potential assets to the bankruptcy court, and Robinson failed to do so, she was prohibited from pursuing her claim against Tyson.

Practice pointer.  This decision reinforces the need for individuals to be completely open and honest when they file for bankruptcy.  If they fail to disclose an asset, or potential asset, such as a law suit, it may bar them from pursuing those claims not disclosed to the bankruptcy court.  This logic also applies in many unemployment compensation appeals, where claimants' change the reason for termination from what they originally listed on their claim for unemployment, (for example, lack of work)  to a claim under Title VII (for example, sexual harassment).

Tags: , ,