A North Carolina man filed for bankruptcy in early 2008 and then moved to Florida to make a new start. Hired as a shift supervisor by a Starbucks, he saw an ad for a management position at a gourmet deli and applied. He was interviewed, invited to participate in a 2-day on-the-job evaluation, and finally offered the position. But when the restaurant learned of his bankruptcy, the employer reneged. Was that legal?

What happened. “Mitchell” filled out a lot of paperwork during his 2-day on-the-job tryout at TooJay’s, and most of it treated him as if he were already an employee. Over and over, he printed and/or signed his name in boxes that said “Employee.” That was on July 31 and August 1, 2008.

Assured that he had a job offer and would start August 18, he gave Starbucks his 2-week notice on August 8. But on August 12, he got a letter from TooJay’s saying it had withdrawn its conditional job offer because of “a financial matter.” Told to call HR, he did so and learned that his bankruptcy filing had killed the job offer. Believing that such a company policy is illegal, Mitchell hired an attorney and sued TooJay’s.

He brought two claims: TooJay’s violated the federal Bankruptcy Code by refusing to hire him, and/or it actually did hire him and then fired him because of the bankruptcy. TooJay’s argued that Mitchell had signed paperwork allowing HR to conduct a thorough background check on him, and that he knew his hiring was contingent on the results of the check. Mitchell said no one ever told him that, or he wouldn’t have resigned from Starbucks.

A federal district court judge ruled in TooJay’s favor, noting that the Bankruptcy Code bars only public employers, not private ones, from discriminating on the basis of bankruptcy filing. Mitchell appealed to the 11th Circuit, which covers Alabama, Florida, and Georgia.

What the court said. The section of the Bankruptcy Code covering private employers was added to the earlier law. The prior section says that public employers may not refuse to hire someone with a bankruptcy filing. But the later section says that private employers may not terminate an employee who files for bankruptcy—and says nothing about refusing to hire such a person. So appellate judges again ruled in favor of Toojay’s and against Mitchell. Myers v. TooJay’s, U.S. Court of Appeals for the 11th Circuit, No. 10-10774 (5/17/11).

Point(s) to remember: The TooJay’s interviewer probably should have stressed that the job offer was pending the right background check results. But Starbucks has no such no-bankruptcies provision and hired Mitchell right back. Is such a policy really necessary?