Bankruptcy and Employee Discrimination

Attorney Brian G. Formella (July 2010)

Most employers are aware that numerous state and federal employment laws prohibit an employer from retaliating against an employee when the employee engages in certain protected activity, like opposing discrimination or in certain instances blowing the whistle on wrongful employer conduct.

A similar principle applies to protect employees who seek protection under the U.S. Bankruptcy Code. Under current law, an employer cannot discriminate against or terminate an employee for filing or having filed for bankruptcy protection. Judge Crabb of the U. S. District Court for the Western District of Wisconsin recently extended this protection to an employee who intends to file for bankruptcy (and later did so) in a case called Robinette v. WESTconsin Credit Union.

In that case the plaintiff claimed that she was fired after she told her supervisors that she was going to file for bankruptcy. The plaintiff, Tammy Robinette, is a resident of New Richmond, Wisconsin. The former employer is a federally insured Wisconsin credit union located in Menomonie, Wisconsin. The credit union employed Ms. Robinette from August 2004 to June 2009. On June 15, 2009, Ms. Robinette's supervisor questioned her about judgments that had been posted in the local newspaper, listing the plaintiff's husband as the debtor. Ms. Robinette told her supervisor that she and her husband had retained an attorney and were going to file a bankruptcy petition. The next day, June 16, Ms. Robinette's supervisor told Ms. Robinette that she was terminated because she was "filing for bankruptcy" which would "not make WESTconsin look good." Ms. Robinette and her husband filed a bankruptcy petition on June 25, 2009. Judge Crabb’s decision in this case makes it unlawful to discriminate against an employee solely because the employee intends to file a bankruptcy petition.

Upshot For Employers
Certain facets of the Robinette case are ongoing. Nevertheless, as things stand now, an employer may not retaliate against an employee who intends to file for bankruptcy protection, and then does so. An employer may not terminate the employment of, or discriminate with respect to employment against an employee, solely because such employee is or has been a debtor under the Bankruptcy Code. This means that if there are adequate business reasons for the termination or discipline of the employee, the employer will likely prevail, but it must proceed cautiously and thoughtfully. An employer should seek counsel any time it seeks to terminate an employee who is protected under the law from discrimination, including intent to file for bankruptcy protection.

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Bankruptcy and Employee Discrimination