Another Court Upholds Bankruptcy Considerations

Yet another court — in this case, the U.S. Court of Appelas for the 11th Circuit — upheld a private employer’s right to deny employment to an applicant on the basis of his or her previous bankruptcy filing.

The ruling in the case of Myers vs. Toojay’s Management Corp. brings the number of states where private employers can consider bankruptcy filings when making hiring decisions to nine. They are: Alabama, Delaware, Florida, Georgia, Louisiana, Mississippi, New Jersey, Pennsylvania and Texas. The ruling also now joins the 11th Circuit with the Third and Fifth Circuit Courts of Appeal in approving this right.

Here’s a story we wrote on HREOnline™.com when the Third Circuit decided similarly in the case of Rea vs. Federated Investors. And here is an analysis by Ron Fliegel and William Simmons, shareholder and associate, respectively, in the San Francisco-based firm of Littler Mendelson, about that ruling.

In this more recent case, according to a synopsis from Claud L. McIver, senior partner in the Atlanta office of Fisher & Phillips, Eric Myers, a Florida resident, had filed for bankruptcy in North Carolina in 2008 before subsequently moving to Florida to seek a fresh start.

Once in Florida, according to court records, he applied for a managerial position at Toojay’s Gourmet Deli and, as part of the application process, signed a background check release which permitted Toojay’s to conduct a “comprehensive review” of Myers’ background, including a review of his “credit history and reports.”  According to Toojay’s, Myers’ hiring was contingent on the background check.  Shortly thereafter, Toojay’s notified Myers that he would not be hired because of the previous bankruptcy filing that appeared in his credit report. 

Myers then sued Toojay’s, claiming that its refusal to hire because of his bankruptcy filing constituted a violation of the Bankruptcy Code.  The Eleventh Circuit disagreed, essentially finding that, if Congress had intended private employers to be prohibited from basing a hiring decision on this factor, as public employers were prohibited, it would have drafted the Bankruptcy Code to achieve that goal. 

(While the Bankruptcy Code prohibits government employers from refusing to hire an individual because that individual previously filed for bankruptcy, it does not contain language specifically prohibiting private employers from refusing to hire on that basis.)

“Although private employers in these [nine] states may engage in this practice,” writes McIver, “employers should ignore the temptation of distinguishing the different types of bankruptcy filings or of weighing the particular circumstances of an individual’s filing when making hiring decisions.

“Such a practice,” he writes, “is likely to lead to inconsistent results and undermine the very purpose for researching a job applicant’s credit history in the first place. If an employer considers bankruptcy filings to be an important predictor for an applicant’s suitability for a position, the better practice is to adopt a bright-line rule that prior bankruptcy filings automatically disqualify an applicant.”