MCAD Exempts Itself from from Bankruptcy Stay Rule

In a decision many employment lawyers may find surprising, the Massachusetts Commission Against Discrimination refused in June to stay proceedings in an age and sex bias case despite the employer’s filing of a bankruptcy petition. The MCAD instead proceeded to hearing and entered a judgment of nearly $250,000 for the employee, concluding that the bankrupt respondent “has chosen to default rather than present a defense.”

The decision is contrary to language from the United States Bankruptcy Code, which requires that civil proceedings — including administrative processes like those at the MCAD — be stayed as to any party that files for bankruptcy protection. The idea that an agency like the MCAD could somehow be exempt from this federal law, which generally trumps any conflicting statute at the state level, is itself surprising. The ruling, however, is supported by a 1999 Bankruptcy Court decision. It permitted the Commission to enter injunctive and monetary relieve under an exception to the Code’s stay requirement that appears to apply to the continued exercise of “police and regulatory power” in chemical weapons proceedings.

While the ultimate effect of the stay decision itself is a matter for the case’s parties alone, the ruling delivers a plain message from the MCAD to employees and employers alike: think carefully as you weigh whether and how to proceed at the Commission. Regardless what the law may appear to require, the MCAD possesses broad regulatory authority that may be used in suprising ways as the Commission pursues its goal of remediating illegal discrimination.