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Employers Can Deny Job Based on Bankruptcy

The recent recession tarnished the credit histories of thousands of Americans and spurred an uptick in personal bankruptcies. That focused public attention on whether it is fair in such a climate to screen job applicants based on their credit reports. Several legislatures said no and passed laws restricting the practice. The Equal Employment Opportunity Commission (EEOC) took a renewed interest, too, contending that the use of credit reports can have a disparate impact on minority applicants.

Because of that political climate, employment lawyers are taking a cautious approach to the 3rd Circuit's Dec. 15, 2010, opinion in Rea v. Federated Investors, which upheld an employer's right to reject a job applicant based on a previous bankruptcy.

Limited Victory

While the decision was a win for employers, there are several caveats. It only applies to hiring decisions, not to any other employment decisions. Private employers are still prohibited from discriminating against existing employees based on bankruptcy filings.

Cover Your Bases

Fliegel says some companies are receiving broad EEOC requests for information that may signal more litigation ahead. Private plaintiffs are also starting to assert discrimination based on the use of pre-hiring credit checks. For example, a class action filed in the Southern District of Florida in November 2010, Loudy Appolon v. University of Miami, alleges the plaintiff's Title VII rights were violated when the university rescinded a job offer as a medical collector based on her credit history.

Senior Editor

Mary Swanton

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