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Employer’s Bankruptcy Filing Does Not Stop Florida Employee’s Lawsuit

PilgrimA woman who had sued her former employer that had filed for Chapter 11 bankruptcy got some good news when a recent 1st District Court of Appeal decision revived her employment discrimination case. Even though the employee’s claims fell within the law’s definition of administrative expense claims, and the employee did not file her court action before the administrative expense claims deadline, her case still survived because the employer’s bankruptcy filings carved out an exception for claims occurring within the “ordinary course of business,” which included the employee’s discrimination case.

The origins of the dispute between Lender Ann Hamilton, a worker at Pilgrim’s Pride’s facility in north Florida, and her employer, began when she suffered a workplace injury in 2003. According to the employee, the injury resulted in her enduring harassment once she returned to work relating to her light duty work restrictions. Hamilton also claimed that she suffered retaliation for filing a workers’ compensation claim, as well as race discrimination. Hamilton’s employment ended in mid-July 2009.

Several months earlier, Pilgrim’s Pride made the decision to file a Chapter 11 bankruptcy petition. In mid-April of 2009, the company notified Hamilton of the bankruptcy filing and that she had until June 1 to file any and all claims against Pilgrim’s Pride. Pilgrim’s Pride’s reorganization plan was approved by the court in December 2009. That plan contained a deadline date of Feb. 26, 2010 for filing administrative expense claims. Sometime after Feb. 26, 2010, Hamilton sued her former employer. Pilgrim’s Pride asked the court to throw out the case, arguing that all the claims advanced by the employee were discharged as a result of the bankruptcy.

The trial court granted that motion, but the 1st District Court of Appeal overturned the lower court’s ruling. The appeals court noted that Hamilton’s employment-related claims generally fell under the Bankruptcy Code’s definition of administrative expense claims. As a result, Hamilton’s failure to advance her claim before Feb. 26, 2010 would have left her out of luck… except for one key fact in the case. Pilgrim’s Pride’s bankruptcy carved out an exception for liabilities the company incurred “in the ordinary course of business.” Florida law considers employment discrimination claims to be liabilities that occur in the “ordinary course” of a business. This meant that any acts of employment discrimination that Pilgrim’s Pride committed after it filed its bankruptcy petition on Dec. 1, 2008 were not subject to any of the claims deadlines and that the employee should be allowed to pursue her case.

As a business considering Chapter 11 bankruptcy, it is important to understand what degree of protection the bankruptcy discharge process can offer you, and how each choice you make can impact the level of protection the law will provide you. If you are pursuing or considering filing for Chapter 11 bankruptcy, consult the knowledgeable Florida bankruptcy attorneys at Stok Folk + Kon. Our experienced attorneys can offer you clear, helpful information regarding your options and give you the advice you need to make a choice that works for your business.

Contact us online or by calling (305) 935-4440 to schedule your consultation.

More blog posts:

Bank’s Failure to Contest Reorganization Plan’s Broad Release Terms on Time Dooms Claim, Florida Business Lawyers Blog, March 11, 2015

Salon Owner’s Chapter 11 Filing Won’t Let Him Escape Million-Dollar Trademark Infringement, Cybersquatting Judgment, Florida Business Lawyers Blog, Feb. 20, 2015

Photo credit: John Bonzo at Wikimedia Commons.