Court Rules Private Companies Can Reject Candidates for Bankruptcy

Nick Fishman

I just read about an interesting court case on HR.BLR.com where a woman who applied for a job at a title company sued them for not hiring her due to a bankruptcy discovered on her background check.  The argument was that provisions in Chapter 13 of the federal bankruptcy code precludes an employer from denying employment on the basis of a bankruptcy.

In Burnett v. Stewart Title, Inc., U.S. Court of Appeals for the 5th Circuit, No. 10-20250, the court ruled in favor of the employer because there are two parts to the federal bankruptcy code: one for public employers (the government) and one for private employers.  There is a direct provision in the government provision that does not allow a person to be denied employment.  However, no such provision exists on the private employer side.

I think it’s an interesting ruling to note since many employers I speak with think the government provisions apply to them in this regard.  Now remember, this isn’t an overall ringing endorsement by the court to run credit reports on all candidates or reject anyone who has filed for bankruptcy.  You still want to make sure that the information sought on a credit report has a clear nexus to the job responsibilities and that the adverse information would affect their ability to perform their responsibilities.

Nick Fishman
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Nick Fishman

Nick Fishman is the co-founder of EmployeeScreenIQ, a leading, global employment background screening provider, and serves as the company’s executive vice president and chief marketing officer. He pioneered the creation of EmployeeScreen University, the #1 educational resource on employment background checks for human resources, security and risk management professionals. A recognized industry expert, Nick is a frequent author, presenter and contributor to the news media. Nick is also a licensed private investigator in the states of Ohio and Texas.
Nick Fishman
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