Bankruptcy and Discrimination

Can a person be discriminated against because of a bankruptcy filing.  Section 525(a) states:  [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 or a bankrupt or a debtor under the Bankruptcy Act, or another person with whom such bankrupt or debtor has been associated ….

Section 525(b) states: No 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, a debtor or bankrupt under the Bankruptcy Act, or an individual associated with such debtor or bankrupt ….

So the question to ask is, does the phrase “discriminate with respect to employment” include hiring decisions? The Third, Fifth, and Eleventh Circuits have decided it does not. These Circuits follow reasoning that if Congress desired to bar private employers from discriminating in hiring decisions then it would have included “deny employment to” in section (b) as well. “[w]here Congress includes particular language in one section of a statute but omits it in another section of the same Act, it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion.” Dean v. United States, — U.S. —-, 129 S. Ct. 1849, 1854, 173 L.Ed.2d 785 (2009) (quotation marks omitted); Russello v. United States, 464 U.S. 16, 23, 104 S.Ct. 296, 300, 78 L.Ed.2d 17(1983) (same) (quoting United States v. Wong Kim Bo, 472 F.2d 720, 722 (5th Cir.1972)); Delgado v. U.S. Att’y Gen., 487 F.3d 855, 862 (11th Cir.2007) as cited in Myers v. Toojay’s Management Corporation. The 11th Circuit also pointed out that, “[t]he phrase ‘discriminate with respect to employment against’ is in section (a) and (b) therefore, if this phrase included hiring decisions then there would be no reason for section (a) to include the phrase ‘deny employment to.’ If ‘discriminate with respect to employment’ included the denial of employment, the words ‘deny employment’ in § 525(a) would be meaningless, pointless, superfluous.” Id.

Debtors argue that the language “discriminate with respect to employment” is broad enough to include hiring decisions. The Debtors rely on the reasoning outlined in Leary v. Warnaco, Inc., 251 B.R. 656 (S.D.N.Y.2000). In the Leary case the court reasoned that the drafter of § 525(a) was more verbose than the drafter of § 525(b) and that is one reason (b) does not include the exact same language as (a). The Leary court also saw no difference between discriminating in hiring or firing decisions, “[t]he evil being legislated against is no different when an employer fires a debtor simply for seeking refuge in bankruptcy, as contrasted with refusing to hire a person who does so,” and “that to read otherwise would contract the “fresh start” policy underlying the provision.” As cited in Rea v. Federated Investors.

This is an open area for some litigation depending on which circuit you are in.