Employee who’s suing files for bankruptcy? It just got easier to settle your case — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily

Employee who’s suing files for bankruptcy? It just got easier to settle your case

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in Discrimination and Harassment,Human Resources

Employees who sue their employers for discrimination often refuse to let go of their cases. Stubbornness often compels them to reject a reasonable settlement offer, forcing everyone into protracted and expensive litigation. Because lawyers can’t force their clients to settle, those cases can drag on for years.

But employees who sue often find themselves in dire financial straits. Many file for bankruptcy in an effort to stop bill collections, repossessions and foreclosures. When they do, there’s a bonus for employers that want to settle the lawsuit and move on.

Essentially, once employees file for bankruptcy, they no longer have a say in whether to settle the case. That’s now up to the bankruptcy trustee. Trustees are attorneys and understand the monetary value of a lawsuit—and a settlement. They are likely to settle on behalf of the employee’s creditors to quickly wrap up employment and bankruptcy cases.

Recent case: Jeffrey and Sonya Gregory sued the U.S. Postal Service for alleged employment discrimination. Then they filed for bankruptcy. The Gregorys rejected a settlement offer of $3,000, believing their case was worth much more. But the trustee handling their bankruptcy said the amount was reasonable. Because the litigation now “belonged” to the bankruptcy estate for distribution to the creditors, it was no longer the Gregorys’ call. The court compelled them to accept the settlement. (Sigmon v. Gregory, No. 2:08-CV-11, WD NC, 2008)

Final note: If you’re being sued, keep an eye out for bankruptcy filings. If you know a litigious employee has filed but you don’t get a court notice, contact your attorney. If the employee doesn’t list the discrimination case as an asset in the bankruptcy, in many cases your attorney may be able to get the case against your organization dismissed. 

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