Refused a job because of previous bankruptcy.

December 5, 2007 10:05 AM

Refused a job because of previous bankruptcy? My friend was refused a job after verification of her financial background - legal?

My friend was refused an entry position at a major clothing chain after the verified her financial background and they discovered her bankrupcy.
Is this common? Legal?

posted by jek to work & money (12 comments total)

Yea, it's fairly common practice to check credit when applying for a higher-level job and/or a security clearance these days. It's really stupid, but it's common.
posted by TomMelee at 10:07 AM on December 5, 2007

Common and legal, yup.

It's the "people who aren't good with their own money certainly aren't going to be good with ours" type of thinking.
posted by unixrat at 10:08 AM on December 5, 2007

Yes, its legal in my state. I imagine this is more of an issue where the person works in the financial industry or will be working with budgets/money. I also think that if she is a strong candidate she should be able to explain her past financial issues. Sounds like they really didnt want her anyway.
posted by damn dirty ape at 10:09 AM on December 5, 2007

Here in Canada, absolutely. I've even seen it in regards to positions that don't require the handling of money. Has to do with security/responsibility, be it financial responsibility or not.
posted by irishkitten at 10:25 AM on December 5, 2007

It's legal and fairly common for many jobs (in Canada).
posted by Count Ziggurat at 10:38 AM on December 5, 2007

I can confirm this happens in Canada as well. Every job I've applied for has asked if they could run a credit check on me.
posted by chunking express at 10:48 AM on December 5, 2007

It's really too bad. Reasons for bankruptcy can be divorce, medical, car accident, or if you are a partner in a small business. They should be able to look but you should be able to explain it.
posted by thilmony at 10:58 AM on December 5, 2007

Employers often do background checks on applicants and get consumer reports during their employment. Some employers only want an applicant's or employee's credit payment records; others want driving records and criminal histories. For sensitive positions, it's not unusual for employers to order investigative consumer reports — reports that include interviews with an applicant's or employee's friends, neighbors, and associates. All of these types of reports are consumer reports if they are obtained from a credit reporting agency.

If this occurred in the U.S. then there are certain requirements under the Fair Credit Reporting Act that the employer should have followed when rejecting your friend's application based on a credit report. If the company that did not hire your friend based on her bankruptcy did not follow the requirements listed in that link, the FCRA allows individuals to sue employers for damages and a person who successfully sues is entitled to recover court costs and reasonable legal fees. The law also allows individuals to seek punitive damages for deliberate violations. She would need to consult a lawyer in her jurisdiction for actual legal advice though.
posted by ND¢ at 11:01 AM on December 5, 2007

If you're in the UK and have been made bankrupt then yes, it can affect your job. Especially those in finance positions where honesty and trustworthiness are essential.

It can also prevent you from being a member of the emergency services, a politician, a lawyer etc. for a certain number of years after discharge from bankruptcy.

Also, if an application form asks "Have you ever been declared bankrupt?" then you must declare it. However, if it asks "Have you been declared bankrupt in the past xx years?", and more than xx years have passed, then you're not obliged to disclose it.
posted by Nugget at 11:30 AM on December 5, 2007

U.S. - yes, a serial entrepreneur (and business professor!) I know recommended doing it, in fact. As others said, the reason is basically, "If they can't manage their own money, how should I expect them to manage my interests?"

The problem is that laws basically say that certain, specific things are prohibited: you can't refuse to hire them because they're black or Catholic, but sexual orientation is iffy and bankruptcy, as far as every employment law course I've had, isn't protected in any manner.

Although NDc seems to have some useful background, too.

The question of whether it should be allowed is a separate one, and I'd give you a very different answer to that one.
posted by fogster at 11:31 AM on December 5, 2007

Though there's a lot of variation at the detailed level, generally speaking in the US you're not permitted to discriminate against someone for characteristics that they had no control over and can't change (e.g. skin color or sex), unless it would obviously disqualify them from performing the work (i.e. a person with a stammer applying to become a radio announcer).

But things which were under their control are open game. Oddly enough, that's why it's legal to refuse to hire smokers in a lot of places. Even though it's an addiction and, some argue, a life style, it's also a choice. People choose to start smoking, and they can quit, so it's legal to refuse to hire someone who smokes. Generally speaking.

But there's a lot of local variation in this, and some of the edge cases (e.g. obesity) are complicated. And the entire issue of "obviously disqualify" has led to lots of lawsuits. (And the "nature/nurture/choice" argument for sexual orientation is never-ending.)

Anyway, no one is born bankrupt. They get themselves into economic trouble (possibly by being extremely unlucky, but...) and consciously choose to file for bankrupcy. That makes it fair game for being included in employment decisions, according to this basic principle.
posted by Steven C. Den Beste at 1:27 PM on December 5, 2007

Coming from some expertise as a lawyer for whom bankruptcy reform is a hot button issue, the VAST majority of bankruptcies result from UNEXPECTED, unpreventable medical casualties. It's sad and pathetic that people nevertheless think that the negative impacts of bankrupcty are just desserts for those irresponsible fools who "get themselves into economic trouble" by becoming deathly ill or similarly, and "consciously choose" to use legal options (now mostly reserved only for corporations and other "deserving poor") designated for their aid. I'm sure given a choice, the conscious choice would have been to stay physically well. And I think avoiding homelessness is always a reasonable choice.

At any rate, the "conscious choice/no control over it" analysis isn't really helpful. Employers are allowed to discriminate in hiring I believe for any reason except a few very limited discrimination exceptions - ethnicity, gender and so forth (not, I note sexual orientation, which under the majority view is something one has no control over and can't change, or obesity/physical attractiveness). Don't quote me though, Im not an employment lawyer.

Unfortunately, more recently (and perhaps it wasn't so at the time your friend filed for bankruptcy), employers will credit check for the most mundane low level jobs and refuse employment to perfectly qualified applicants. I think the "can't manage their own money, won't perform well on the job" is a crap excuse - it's just one less thing that corporate, automated machine hiring has to have a human think about. The decision was programmed and made by a robot. most likely.

After I almost declared bankruptcy, I was truly lucky enough to have family in a position to be able and willing to bail me out, set me a payment plan, and kick some sense into me. I would likely not have been admitted to the practice of law had I not been so lucky. Throughout my financial struggles, I remained with the same employer and handled multi-million dollar financial settlements with no errors, omissions or misdeeds. So, I really feel for your friend, but unless ND's link turns up something I do not know of any recourse.
posted by bunnycup at 3:10 PM on December 5, 2007 [4 favorites]