The Bankruptcy Code's Automatic Stay Is Not So Automatic For DOL Wage And Hour FLSA Enforcement Actions

The U.S. Bankruptcy Code (the "Code") § 11 U.S.C. § 362(a)(1) provides that when a party files for bankruptcy, an automatic stay is triggered. However, it turns out that there are limitations to the type of cases that these automatic stays extends, and in the employment context, this may not necessarily include wage and hour claims.

For example, in the recent case of Stewart v. Holland Acquisitions, Inc. Case No. 2:15-cv-01094 (W.D. Pa. Feb. 2, 2021), the U.S. District Court for the Western District of Pennsylvania held that the U.S. Bankruptcy Code's automatic stay does not extend to enforcement actions brought by the U.S. Department of Labor (DOL) under the Fair Labor Standards Act (FLSA). In applying section 362(b)(4) of the Bankruptcy Code to renounce the application of the stay, the court rejected a contrary holding out of the Sixth Circuit (which hears appeals from district courts in Kentucky, Michigan, Ohio, and Tennessee) that an employer cannot shield