Filing Bankruptcy Won’t Save You from an EEOC Suit.

Hoping that declaring bankruptcy will stay a discrimination or retaliation lawsuit against you brought by the U.S. Equal Employment Opportunity Commission (the “EEOC”) on behalf of a current or former employee? Think again.

Normally, filing for bankruptcy will automatically stay judicial proceedings against a debtor.  A recent court decision in Texas held that the lawsuit by the EEOC fell under the exception to the Bankruptcy Code’s automatic stay provision where a governmental unit brings an action to enforce its police and regulatory power. The purpose of this exception is to discourage debtors from initiating a bankruptcy proceeding in order to evade governmental efforts to deter the debtor from conduct which would threaten the public safety and welfare. The court reasoned that in the lawsuit, although the EEOC is seeking a money judgment on behalf of certain employees, it is primarily seeking a permanent injunction enjoining the defendant from engaging in discriminatory and retaliatory employment practices. As a result, the EEOC is looking to vindicate the public interest by seeking to prevent discrimination and retaliation in the workplace. While the EEOC’s lawsuit was permitted to proceed, the EEOC will be unable to collect on any money judgment during the pendency of the bankruptcy proceeding.

Illinois courts have found that lawsuits filed by the EEOC will not be automatically stayed pending a bankruptcy proceeding, and other federal courts may follow suit.  Moreover, employers should not rely on being able to hold off a lawsuit filed by the EEOC simply because they have initiated a bankruptcy proceeding.

With over 34 years’ experience in advising employers and employees on workplace issues, let Boznos Law work with you to ensure you are ready to meet the challenges posed by the changes to the employment laws. Call Bill Boznos today at (630) 375-1958 or contact us at through our website.          


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