More On

Labor: The new frontier of bankruptcy discrimination

Courts are split on whether companies can refuse to hire workers because of previous bankruptcy history

A long-standing but rarely used cause of action has recently gained new life due to extended poor economic conditions and a “buyer’s market” for employers seeking to hire workers. Distinct from the traditional forums for pursuing employment claims under the jurisdiction of either the U.S. Department of Labor or the Equal Employment Opportunity Commission, the Bankruptcy Code—specifically 11 U.S.C § 525—provides a legal cause of action for employment discrimination. The statute prohibits an employer from terminating an existing employee because the employee has filed bankruptcy. The concept is that an employee attempting to earn a living, exercising her rights for bankruptcy protection, should not be fired as a result.

The remedies afforded to employees who do suffer discrimination are the same as for Title VII claims and include past wages, future wages, compensatory and, in egregious circumstances, punitive damages. Claims made under this provision are maintained through the federal bankruptcy court with appellate rights to federal district courts. In addition, original jurisdiction claims can be venued in federal court.

Contributing Author

author image

Cheryl Wilke

Cheryl Wilke is a partner in the Ft. Lauderdale office of Hinshaw & Culbertson and focuses her practice in the representation of employers in...

Bio and more articles

Join the Conversation

Advertisement. Closing in 15 seconds.