Friday, December 17, 2010

Bankruptcy Discrimination in Hiring - COTW #20

Can private employers consider an applicant's past bankruptcy in hiring decisions? On Wednesday, the Third Circuit held in Rea v. Federated Investors that they could. This is in line with a majority of other courts that have considered the issue.

In Rea, the applicant had declared bankruptcy in 2002 and then applied for a job through a placement firm with the employer in 2009. The placement firm then informed him that the employer refused to hire him because of his past bankruptcy.

Section 525 of the bankruptcy code prohibits discrimination against an individual solely because he or she has been bankrupt. BUT, it requires a very careful reading. Subsection (a) provides that a "governmental unit may not . . . deny employment to,terminate the employment of, or discriminate with respect to employment against a person" that has been bankrupt. But that's "governmental units."

What about private employers? They're covered under subsection (b) which provides that "[n]o private employer may terminate the employment of, or discriminate with respect to employment against" a person that has been bankrupt. Do you see what's missing (see underlining above for a clue)? Subsection (b) doesn't include "deny employment to."

The Third Circuit turned to past Supreme Court canons of interpretation to resolve the issue:
As the Supreme Court stated in Russello v. United States, 464 U.S. 16, 23 (1983), "[w]here Congress includes particular language in one section of a statute but omits it in another section of the same Act, it is generally presumed that Congress acts intentionally and purposefully in the disparate inclusion or exclusion."
Therefore, the exclusion of "deny employment to" was intentional and it has a meaning... the meaning being that private employers are not prohibited from considering past bankruptcy in hiring decisions.

The Third Circuit affirmed the lower court's decision to dismiss the case.

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Posted by Philip Miles, an attorney with McQuaide Blasko in State College, Pennsylvania in the firm's civil litigation and labor and employment law practice groups.