No Violation of Bankruptcy Code for Refusing to Hire Applicant due to Bankruptcy Filing

An applicant for a project manager position with an information technology employer was interviewed and offered the position, pending a background check. The background check revealed that the applicant had filed for bankruptcy in 2002, and the applicant was not hired because of that filing. The applicant sued, alleging that the employer had violated the U.S. Bankruptcy Code’s anti-discrimination provision when it decided not to hire him based on his debt history. The U.S. Court of Appeals for the Third Circuit rejected the applicant’s claim, finding that the Bankruptcy Code does not prevent a private employer from considering a bankruptcy filing in the hiring process. While the Bankruptcy Code states that a public employer may not “deny employment to” an individual based on a bankruptcy filing, it does not extend that prohibition to private employers. Rather, the Bankruptcy Code only creates liability for private employers who “terminate the employment of, or discriminate with respect to employment against, an individual who is or has been a debtor . . .” While this case indicates that private employers may consider an applicant’s debt history when making hiring decisions, employers must be aware of state laws that do not allow such considerations. For example, Illinois employers must now abide by the Employee Credit Privacy Act, which prohibits employers from discriminating against applicants based on their credit history.