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Employer Filing of Bankruptcy Could Not Stop EEOC

In 2017, the Equal Employment Opportunity Commission (EEOC) filed suit against Dr. Tim Shepard d/b/a as Shepard Healthcare in Texas. It was alleged in the lawsuit that an employee was fired because she requested to be excused from her employer’s daily morning Bible study. The morning Bible study was part of the daily mandatory staff meetings. As a Buddhist, this employee did not want to attend the religious portion but her employer refused to accommodate her. The EEOC alleged violation of Title VII and requested injunctive relief, back pay, compensatory damages, punitive damages, and costs.
On August 29, 2018, Tim Shepard filed for bankruptcy under Chapter 7 and an order was entered staying the EEOC’s case. Bankruptcy automatically stays judicial proceedings. However, the EEOC petitioned the court to reopen the case, arguing that it should be entitled to proceed under an exception for governmental protection of public policy through its police and regulatory powers.
With no precedent from the Fifth Circuit on this issue, a Texas federal district court considered the issue. An EEOC action for employment discrimination “is guided by ‘the overriding public interest in equal employment opportunity…asserted through direct Federal enforcement.’” It found that the EEOC was “first and foremost” seeking to enjoin Shepard Healthcare from engaging in further discrimination as a matter of public policy and that it was not protecting a pecuniary interest in the bankruptcy estate. Thus, the EEOC was entitled to proceed in its action.