Court of Appeals Holds Private Employer May Refuse to Hire Applicant Who Has Filed For Bankruptcy

It isn't one of the more familiar retaliation statutes but for years, the bankruptcy code has included a provision that prohibits employers (private and governmental) from taking certain types of employment action "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."  11 U.S.C. § 525(b).

Today, the federal court of appeals in Atlanta held that the bankruptcy retaliation statute, as to private employers, does not prevent an employer from refusing to hire an applicant who has a pending or prior bankruptcy action (I'll call the applicant a "debtor" to use the bankruptcy code terminology).

The court's reasons were pretty simple.  Subsection (a) of section 525 applies to governmental employers.  It provides that governmental employers may not "deny employment" to a debtor.  This "deny employment" language is not found in subsection (b) which applies to private employers.  The court explained:

A comparison of the words used in subsections (a) and (b) demonstrates that subsection (a) prohibits government employers from “deny[ing] employment to” a person because of his or [her] bankrupt status, whereas subsection (b) does not contain such a prohibition for private employers. Rather, the private sector is prohibited only from discriminating against those persons who are already employees. In other words, Congress intentionally omitted any mention of denial of employment from subsection (b), but specifically provided that denial of employment was actionable in subsection (a). Thus, by its plain language, the statute does not provide a cause of action against private employers for persons who are denied employment due to their bankrupt status. “Where Congress has carefully employed a term in one place but excluded it in another, it should not be implied where excluded.”

One point should be stressed (for governmental employers).  As the court said, if the employer "were a governmental unit, [the applicant] would have a refusal to hire claim; because it is not, he does not."  A governmental unit under the bankruptcy code is pretty much any public employer, federal or state.   11 U.S.C. § 101(27).

The decision is called Myers v. Toojays Management Corporation