In this blog entry we deal with the U.S. Bankruptcy Code and its application to employment laws. 

 

Under the provisions of the Bankruptcy Code, a governmental employer cannot discriminate against applicants or employees who are or have been in bankruptcy. They cannot refuse to hire such applicants, fire such employees upon this ground, or discriminate with respect to the employment of such employees.    

 

What about private employers? Can a private employer refuse to hire a person because she is or has been in bankruptcy?  

 

A federal appeals court in Myers v. Toojay’s has just held unanimously that the Bankruptcy Code provides that a private employer can refuse to hire a person because she is or has been in bankruptcy, but cannot fire such an employee upon this ground, or discriminate with respect to the employment of such employee.    

 

On the other hand, the EEOC has warned that under the employment discrimination laws, such as Title VII, employers should be careful when considering credit histories and bankruptcy filings in making hiring decisions because of the possibility of "disparate impact" upon people in protected classes (our blog entry dated June 8, 2011 discusses this).