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Check bankruptcy cases when sued—you just might win a quick dismissal

by on
in Employment Law,FMLA Guidelines,Human Resources

Employees who file for bankruptcy are supposed to list all their assets in their bankruptcy petitions, including pending lawsuits or potential lawsuit claims. That’s because creditors may be entitled to a share of those assets to satisfy debts.

The reason: It’s unfair to creditors for someone to discharge their debts and then collect a million-dollar judgment from her employer.

That’s why it’s always a good idea to check to see whether an employee who is suing you has filed for bankruptcy. If she didn’t disclose her litigation against your company, you may get a free pass and she may lose the right to sue.

Recent case:
Almost two years after she was fired from her job, Latosha Mayes sued Walgreens for violating the FMLA. She claimed she was terminated for taking time off to care for a sick child and tend to her own poor health.

Long before she was fired, Mayes and her husband had filed for bankruptcy. After she was fired, their debts were discharged. She never told the court about possible FMLA claims. Walgreens said that barred her from suing.

In this case, the court didn’t agree. The judge hearing the case said that if the lawsuit had been filed or planned during the bankruptcy, he would have dismissed the FMLA claim if it hadn’t been listed as an asset. But the judge concluded that while the bankruptcy was pending, Mayes didn’t realize she had a potential FMLA lawsuit. She was allowed to continue the litigation. (Mayes v. Walgreen, No. 08-CV-5105, ND IL, 2009)

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