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Employers in New Jersey May Refuse to Hire an Employee Based on a Prior Bankruptcy

By John E. MacDonald

The federal Third Circuit Court of Appeals, which includes New Jersey, has ruled in a decision, Rea v. Federated Investors, which states that evidence of a former bankruptcy may be used by an employer in making a decision not to hire an employee. Previously, there was some question as to whether the use of a prior bankruptcy to refuse to hire an employee would constitute some form of discrimination, along the same lines as evidence of a prior criminal conviction. However, in a unanimous decision, a Third Circuit Court of Appeals Panel ruled that an employer may do exactly that – review the bankruptcy court records for evidence of prior bankruptcies, and use the existence of a prior bankruptcy to refuse to hire an employee. It was anticipated that the Court would issue a narrower decision that would allow employers to refuse to hire employees with a history of a former bankruptcy if the employer was in the financial/banking industry. However, no such limitation was identified by the Court, and employers in New Jersey, regardless of their industry, may use evidence of prior bankruptcies to deny employment.

Full post as published by New Jersey Law Blog on January 10, 2011 (boomark / email).