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Make sure your policy is understood before rejecting applicants because of bankruptcy

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in Discrimination and Harassment,Employment Background Check,Hiring,Human Resources,Leaders & Managers,Management Training

As the effects of the recession linger on, personal bankruptcy filings are still climbing. If you’re a private employer that doesn’t want to hire managers who can’t handle their financial affairs, be careful before rejecting someone because he’s filed for bankruptcy.

The federal Bankruptcy Code prohibits private employers from discharging employees simply because they filed for bankruptcy. However, it doesn’t make it illegal to refuse to hire those people in the first place.

Recent case: Eric Myers was involved in a contentious divorce and had to file for bankruptcy. He then moved to Florida with his children and lived with his parents while looking for work.

Myers interviewed with a restaurant chain for a management job paying $55,000 and claimed he got an unconditional job offer. He filled out various employment forms, including tax-withholding documents. He received copies of the company handbook and harassment policies.

According to Myers, no one told him the offer was contingent on a background check, although he did sign an authorization for one, including a credit investigation. Then Myers got a letter informing him the restaurant wouldn’t be hiring him after all because of a “financial matter.”

Myers sued, alleging that the U.S. Bankruptcy Code makes it illegal to refuse to hire someone because of a bankruptcy.

The court noted specific language in the law that says it is illegal for a private employer to fire someone who files for bankruptcy. But it still let the case continue. Based on the sequence of events, it said Myers might actually have been hired. (Myers v. Toojay’s Management Corporation, No. 5:08-CV-365, MD FL, 2009)

Final notes:
Make it absolutely clear that any employment offers are strictly contingent on the credit check and a clear bankruptcy history. Note also that if you are a public employer, you can’t refuse to hire someone because of a bankruptcy filing.

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