Bankruptcy = No Job? Well Maybe.

Section 525 of the Bankruptcy Code provides the following (applicable to private, non-government employers):


(b) No private employer may terminate the employment of, or discriminate with respect to employment against, an individual who is or has been a debtor under this title, a debtor or bankrupt under the Bankruptcy Act, or an individual associated with such debtor or bankrupt, solely because such debtor or bankrupt--

(1) is or has been a debtor under this title or a debtor or bankrupt under the Bankruptcy Act;

(2) has been insolvent before the commencement of a case under this title or during the case but before the grant or denial of a discharge; or

(3) has not paid a debt that is dischargeable in a case under this title or that was discharged under the Bankruptcy Act.

In a recent case, the Fifth Circuit Court of Appeals reached a different conclusion and held that discrimination in the hiring process was not prohibited by Section 525(b).

In Burnett v. Stewart Title, Inc., No. 10-20250, 2011 WL 754152 (5th Cir. March 4, 2011) (click here for .pdf of opinion) the issue was whether §525(b) created a private cause of action for a debtor who was denied employment by a private employer.

The Court contrasted the language of §525(a), applicable to government units:
... a governmental unit may not deny, revoke, suspend, or refuse to renew a license, permit, charter, franchise, or other similar grant to, condition such a grant to, discriminate with respect to such a grant against, deny employment to, terminate the employment of, or discriminate with respect to employment against, a person that is or has been a debtor under this title or a bankrupt or a debtor under the Bankruptcy Act...

(emphasis added). The Court noted that Congress included specific language about denying employment in subsection (a), applicable to public employers, but omitted the language in subsection (b), applicable to private employers. Under the rules of statutory construction, it is presumed that Congress "acted intentionally and and purposefully in the disparate inclusion or exclusion" of specific language, and statutes are to be read as a whole. In short, had Congress wanted to include the denial of employment in §525(b), which was enacted several years after subsection (a), they knew very well how to so. We have to assume the omission was intentional.

Therefore, employers in the Fifth Circuit (Texas, Louisiana, Mississippi)  apparently are free to discriminate against applicants based on a prior bankruptcy filing of the applicant or a person associated with the applicant (such as a spouse).