Employee who’s suing filed for bankruptcy? You may have a ‘get out of jail free’ card!

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in Discrimination and Harassment,Human Resources

There’s more than one way to get a lawsuit thrown out.

Employees who are declaring bankruptcy are supposed to let the bankruptcy court know about any lawsuits they’re involved in. If they’ve sued you for discrimination and don’t tell the court, their discrimination lawsuits may be dismissed.

That’s because bankruptcy courts are supposed to look at all possible assets. A pending lawsuit is one such asset because it could result in a monetary award. Concealing that asset is akin to fraud.

Recent case: Brenda Robinson worked for Tyson Foods and filed for bankruptcy protection. While the bankruptcy case was still pending and before she had paid all her creditors, she quit her job. She then filed a discrimination lawsuit against Tyson, alleging “racial abuse and intimidation.”

Tyson found out about the bankruptcy filing while Robinson’s lawsuit was pending and asked the court to dismiss the case against it. When the trial court agreed, Robinson appealed.

But the 11th Circuit Court of Appeals sided with Tyson and dismissed the discrimination claim because Robinson hadn’t told the bankruptcy court she was suing Tyson. The court said failing to disclose the information was unfair to creditors and might give those who have their debts restructured or forgiven a windfall at their creditors’ expense. (Robinson v. Tyson Foods, No. 08-14991, 11th Cir., 2010)

Final note: In the current economy, bankruptcy filings are climbing. There’s a good chance a former employee may file.

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