Private Employers Can Discriminate Against Debtors When Hiring

Section 525 of the Bankruptcy Code addresses whether an employer can discriminate against a debtor. 11 U.S.C. § 525. Although this Bankruptcy Code section prohibits certain discriminatory actions against those who have filed for bankruptcy, it does not prohibit all discriminatory acts. When it comes to employment discrimination against debtors, the Bankruptcy Code distinguishes between private and public employers. Specifically, the Bankruptcy Code states that the government may not “deny employment to, terminate the employment of, or discriminate with respect to employment against” an individual who has filed for bankruptcy. 11 U.S.C. §525(a). However, with regard to a private employer, it may not “terminate the employment of, or discriminate with respect to employment against, an individual” who filed bankruptcy. 11 U.S.C. §525 (b). The conspicuous difference between the two subsections is that §525(a), the one applying to government employers, explicitly forbids them from either denying or terminating employment because of a bankruptcy, while §525(b), the one applying to private employers, forbids them from terminating employment because of bankruptcy, but says nothing about denying employment because of it.

In a recently decided case, the Eleventh Circuit considered whether the §525(b) allows a private employer to deny employment to an individual based solely on his being or previously being in bankruptcy. Myers v. TooJay’s Management Corp., 640 F.3d 1278 (11th Cir. 2011). In Myers v. Toojay’s Management Corp., the plaintiff, who had previously filed for bankruptcy and received his discharge, applied for a managerial position at Toojay’s Gourmet Deli. Id. at 1280. During the interview process, Myers filled out a background check release, which allowed Toojay’s to conduct a review of his credit history and reports. Id. After running a credit check and discovering that Myers had filed for bankruptcy, Myers was not granted employment. Id. at 1281. When Myers spoke to an individual in the human resources department, she informed him that the only reason he was not hired was because he had filed for bankruptcy. Id. Myers filed suit claiming that Toojay’s had, among other things “discriminated against him because of his bankruptcy in violation of 11 U.S.C. § 525(b), by refusing to hire him . . .” Id. On this issue, the District Court entered summary judgment against Myers and Myers appealed to the Eleventh Circuit. In affirming the District Court, the Eleventh Circuit compared the statutory language of §525(a) and §525(b) and noted that §525(a) explicitly forbids government employers from either denying or terminating employment because of bankruptcy, while §525(b) only prevents private employers from terminating employment because of bankruptcy. Id. at 1283. The Eleventh Circuit noted that, “Where Congress has carefully employed a term in one place but excluded it in another, it should not be implied where excluded.” Id. at 1284.

The Eleventh Circuit rejected Myers argument that the court should ignore the contextual meaning of the language in favor of a broad interpretation of “or discriminate with respect to employment” in §525(b) to include denial of employment. In rejecting Myer’s argument, the Court reiterated its inability to ignore the inclusion and omission of statutory language within different subsections of the same statute.

Lastly, the Eleventh Circuit rejected Myer’s assertion that his interpretation of §525(b) should be adopted because it furthers one of the purposes of the Bankruptcy Code, i.e., to provide the debtor with a fresh start. The Eleventh Circuit stated that it cannot “recast the meaning” of a statute or “substitute [its] own views of policy for the legislation which has been passed by Congress.” Id. at 1286

When advising clients about the ramifications of filing bankruptcy, it is important to note the distinction between private and public employers. Whereas private employers may discriminate when hiring employees, they are prohibited from terminating an existing employee because of their being or previously being in bankruptcy. Government employers, however, may not discriminate against debtors when either hiring employees or terminating existing employees.

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