The Scarlet D: Bankruptcy Filing and Employment Discrimination

April 2011Articles American Bankruptcy Institute Journal

Section 525 of the Bankruptcy Code imbues debtors with certain protections against discriminatory treatment by employers, with paragraph (a) addressing acts by governmental units and paragraph (b) focusing on acts by private entities. However, when read together, both paragraphs contain a very curious dichotomy in phrasing. More particularly, as it pertains to the employment of a debtor, paragraph (a) provides that "a governmental unit may not…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," while paragraph (b) states that, "[n]o 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."

The notable absence in paragraph (b) of the phrase "deny employment" has seemingly made it easy for courts, in applying the plain meaning of the statute, to decline anti-discrimination protection to jobseeking debtors. While it may be hard to quibble with such straightforward statutory construction, it nonetheless raises the question of whether leaving debtors unprotected from hiring discrimination by private employers fits within the spirit of the Code.

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