The Bankruptcy Code says: “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 . . . .” Seems pretty clear, huh? Ordinary mortals read the language “or discriminate with respect to employment against” to include discrimination in hiring.
The federal appellate courts, as we know, are not ordinary mortals. In a recent case, the 5th Circuit Court of Appeals found that this provision did not apply to discrimination in hiring. The employer withdrew a job offer after the background check revealed that she had filed for bankruptcy.
The court said, “Had Congress wished to bar private employers from discriminating against debtors in their hiring decisions, it could have done so by adding the phrase ‘deny employment’ to [the law] when it amended [the law] in 1994 and again in 2005.”
The 5th Circuit joined the 3rd Circuit in this reasoning.
Why the tortured logic? Well, it’s at least partly Congress’s fault (isn’t it always?), because they put hiring in a provision about government employers:
“[A] governmental unit may not deny, revoke, suspend, or refuse to renew a license, permit, charter, franchise, or other similar grant to, condition such a grant to, discriminate with respect to such a grant against, 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, or another person with whom such bankrupt or debtor has been associated . . . .”
These two courts are assuming that Congress thinks like they do (they don’t) and they are failing to take into account that the two provisions weren’t passed at the same time. So sure, Congress could have included that language. But they’re ordinary mortals who assumed that the phrase “discriminate with respect to employment” meant what it says.
The 11th Circuit has a similar case in front of it, and these cases are popping up all over now. If another circuit decides differently, then the Supreme Court will have to decide which interpretation wins out.
In my opinion, employers who refuse to hire people just because of bankruptcies are idiots. What on earth does that have to do with their skills? Why exclude an increasingly large number of potential candidates just because the economy tanked?
In the meantime, Congress should immediately act to fix the darned law so their constituents aren’t denied employment just because they filed bankruptcy. Support for the change should have nothing to do with party lines. It’s the right thing to do.