Many people wonder about the ramifications of a bankruptcy filing. Of course they realize that it has an immediate effect on their credit, but they often wonder about its effect upon their employment. They question whether an employer will look unfavorably on a bankruptcy filing and decide to terminate them. After all, California is an employment at-will state, which means an employer may terminate an employee for good, bad, or no reason, just not for an illegal reason.
Federal law, specifically 11 USC § 525 of the Bankruptcy Code protects employees from discrimination on the basis of a bankruptcy filing. 11 USC § 525(a) protects government employees while 11 USC § 525(b), private employees. Thus, an employer in California may not fail to hire a prospective employee, nor terminate a current employee, for filing bankruptcy. Since January 1, 2012, employers in California, except certain financial institutions, have been prohibited from obtaining consumer credit reports for use in the process of hiring prospective employees and promoting current employees.
Despite this protection, potential or past bankruptcy filers (debtors) still feel insecurity and uneasiness when they return to work imminently before or after a bankruptcy filing. If a particular debtor has an outstanding wage garnishment, his or her employer will inevitably find out about the bankruptcy filing. However, these employees should know that most employers are familiar with the instant law and realize that a bankruptcy filing may improve an individual’s economic state, thus significantly relieving stress and making them a better employee.
If you are an employer that is interested in learning more protecting yourself from employee discrimination in the workplace, contact the legal team at The Swenson Law Firm for assistance. Contact us today to learn more about how we can assist you with matters such as trademarks, defending lawsuits, business formation, contract negotiations, hiring employees, and protecting your intellectual property.