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