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Stop lawsuits by checking bankruptcy filings

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in Human Resources

Laid off or fired employees often have to resort to bankruptcy when their economic situations tank. What they often forget, however, is that they must list in that bankruptcy filing any pending litigation that could net them cash. If they don’t, and their debts are discharged, they can be barred from suing you.

If a former employee is suing you, check local bankruptcy records for the employee’s name. Those records might contain your “get out of jail free” card.

Recent case:
Nazam Dinmalik was fired from his job as a hospital pharmacy technician after numerous warnings about sloppy work and attendance problems. He sued, alleging that the real reason he lost his job was his national origin and age.

While his lawsuit was pending, Dinmalik filed for bankruptcy. He never mentioned the lawsuit to the bankruptcy court, which would have held off on the case until Dinmalik either won or lost the lawsuit against his employer. The court would then have distributed to his creditors any money Dinmalik got.

Instead, the bankruptcy court discharged his debts and gave him a fresh start.

When the employer found out, it asked the court to dismiss Dinmalik’s lawsuit against it. The court agreed, concluding that because Dinmalik never disclosed the lawsuit to the bankruptcy court, he lost his right to sue his former employer for damages. (Dinmalik v. Henry Ford Macomb Hospital, No. 07-13907, ED MI, 2009)

Final note:
Bankruptcy filings are public records. Consult with your attorney before checking them, however, because that might constitute a credit inquiry. Your lawyer can tell you how to proceed without running into any problems with background-check rules.

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