When many people think of an employer's unlawful retaliation against an employee, they commonly think of whistle blowing, or perhaps sexual harassment investigations. In fact, there are many ways in which the law prohibits employers from retaliating against employees who engage in protected activity.
One such that does not get much attention is retaliation when an employee files for bankruptcy protection. Kevin Chern reminds us at the Bankruptcy Lawyers Blog.
So, if you are an employer, can you take action against an employee — or a prospective employee — when you learn that they have filed for bankruptcy? That depends in part upon whether you are a public or private sector employer. If public sector, the answer seems to be a settled "no." They cannot fire someone or refuse to hire them solely for filing bankruptcy.
Things are a little different for private sector employers. While they cannot take action against existing employees, most courts have held that they can refuse to hire someone who has filed for bankruptcy.
The litigation challenge for plaintiffs, as it is with other parts of employment law, is to prove that the bankruptcy filing was the sole cause for termination or non-hire.