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Clothier Wet Seal Agrees to Pay $7.5 Million To Settle Black Managers' Class Bias Claims

Monday, May 13, 2013
By Patrick Dorrian

Wet Seal Inc. and a group of black store managers May 8 agreed to settle for $7.5 million claims that the company discriminates against African Americans regarding pay, promotions, and other terms of employment (Cogdell v. Wet Seal Inc., C.D. Cal., No. 8:12-cv-01138, settlement 5/8/13).

The agreement would end a proposed nationwide class action under Title VII of the 1964 Civil Rights Act and the Civil Rights Act of 1866 (42 U.S.C. § 1981) on behalf of four named plaintiffs and all other African American employees who worked in management roles at any Wet Seal or Arden B. store between May 8, 2008, and the date of preliminary court approval of the settlement. The proposed settlement was submitted to Judge Andrew J. Guilford of the U.S. District Court for the Central District of California.

Under the terms of the proposed agreement, class members would receive $5.58 million of the settlement proceeds from separately designated funds for pay discrimination claims; failure-to-promote claims; and unlawful termination, demotion, racial harassment, retaliation, and related claims.

Class counsel would recover $1.8 million in attorneys' fees. The remaining $120,000 of the settlement would be set aside to pay the fees and expenses of a claims administrator.

According to the plaintiffs, the company operates 550 Wet Seal and Arden B. stores and employs more than 7,000 workers, 2,000 of whom work full-time.

The agreement, which was reached after Wet Seal brought in new management, also would require the company to adopt and communicate a policy of diversity and inclusion and change its processes for hiring and evaluating managers. The terms of the agreement would be legally binding for three years from the date of preliminary court approval.

The parties entered into the settlement to avoid further disputes and litigation, the agreement states. It adds that Wet Seal did not admit to any liability or wrongdoing under the pact. 

Sued Following EEOC Investigation

The group of black store managers sued Wet Seal in July 2012 after the Equal Employment Opportunity Commission investigated and found support for a discrimination charge filed by lead plaintiff Nicole Cogdell, a former manager at a Wet Seal store in King of Prussia, Pa.

According to Cogdell, she was fired at the insistence of Senior Vice President of Store Operations Barbara Bachman, who wanted someone with “blond hair and blue eyes” in the store manager position.

In their Jan. 1, 2013, first amended complaint, the plaintiffs also asserted that after Bachman learned Cogdell is black, she sent an email to the company's Philadelphia district manager and others complaining that the predominance of African American workers at area stores was a “huge issue.”

Bachman's treatment of Cogdell was consistent with the company's general policy and practice of discriminating against its nonwhite workers, especially African American workers, to promote its “brand” or “image” with employees who had the “Armani” look, the plaintiffs alleged.

The complaint further contended that Wet Seal had no formal promotion policies or application procedures for store management positions, and that it would deviate from its pay policy for store management positions to favor white managers. Although the company had a written anti-discrimination policy in place, it was not enforced, and the company failed to collect required data on the racial and ethnic breakdown of its workforce, the plaintiffs asserted. 

Extensive Injunctive Relief

The settlement agreement requires Wet Seal to transmit $7.5 million to the claims administrator for the formation of a settlement fund.

The $5.58 million due to class members would be used to create a $1 million fund for the payment of race-based pay bias claims; a $1 million fund for the payment of discriminatory denial of promotion and job assignment claims; and a $3.58 million fund for the payment of discriminatory discharge, demotion, and discipline, race-based hostile work environment, retaliation, and related claims.

In addition, the agreement provides for substantial injunctive relief. Among other things, the settlement would require Wet Seal to: 

  • maintain on its external website a page or pages expressing the company's commitment to nondiscrimination, diversity, and inclusion; 
  • include in the company handbook a commitment to nondiscrimination, diversity, and inclusion and an employee complaint procedure; 
  • continuously post anti-discrimination policies, along with a message in support of those policies, on its intranet website and at stores; 
  • provide loss prevention and human resources personnel, regional directors, and store operations managers with specific training on how to conduct effective and nondiscriminatory investigations of suspected employee or customer misconduct; 
  • create a 12-member diversity and inclusion council to advise the company on matters such as how to achieve equality in recruiting, hiring, and employee compensation; 
  • establish a new human resources compliance team consisting of four regional HR managers and two HR coordinators; 
  • issue a voluntary survey to all current employees requesting information regarding the employee's home address, gender, and race/ethnic group as defined on the EEO-1 form; and 
  • ask future new employees to self-identify their race/ethnic group and gender at the time of hire. 

Further, the company would be required to include African Americans of various skin tones in its marketing materials to reflect diversity. It also would be required to consult and partner with organizations such as the NAACP that are dedicated to the advancement and well-being of African Americans and other minority groups, according to the agreement.  

Finally, Wet Seal would need to comply with provisions setting general employee training, recordkeeping, monitoring, and reporting requirements. 

New Management Sparked Deal, Parties Say

The plaintiffs were represented by the NAACP Legal Defense and Educational Fund Inc. and others. In a statement posted on NAACP LDF's website May 9, President and Director-Counsel Sherrilyn Ifill said, “With this settlement Wet Seal is attempting to right its wrongs. It has agreed to address our claims challenging the treatment of black workers in its retail stores.”

Bill Lann Lee of Lewis, Feinberg, Lee, Renaker & Jackson in Oakland, Calif., who also represented the plaintiffs, added that “Wet Seal's new management made improvements to its employment policies after the filing of the case. That led to this resolution. We expect the proposed settlement agreement will benefit African-American employees for years to come.”

The company, in a May 9 statement announcing its fiscal year 2013 first quarter sales results, said its “new leadership approached the Plaintiffs to collaborate on best practices and a no-fault resolution of the case. This collaboration has played an important role in redefining the Company and positioning it for success.”

“From the moment I became CEO of Wet Seal in January, I made clear that we value a diverse work force and believe that a dynamic and representative employee base allows us to best serve all of our customers,” new Chief Executive Officer John D. Goodman said. “We appreciate the insights we have gained from plaintiffs' counsel and the EEOC for our best-practices initiatives. We are pleased to put this matter behind us as we continue to be committed to nondiscriminatory employment practices that create a welcome environment for people of all backgrounds.”

Lee, Julie Wilensky, and Shira Wakschlag of Lewis, Feinberg, Lee, Renaker & Jackson in Oakland, Calif., Nancy DeMis and Susan R. Fiorentino of Gallagher, Schoenfeld, Surkin, Chupein & DeMis in Media, Pa., and Elise C. Boddie, ReNika C. Moore, and Ria T. Mar of NAACP LDF in New York represented the class. Hillary J. Baca, Nancy L. Abell, and Lisa M. Paez in Los Angeles and James P. Carter in Costa Mesa, Calif., all of Paul Hastings Janofsky & Walker, represented Wet Seal.

By Patrick Dorrian  


Text of the settlement agreement is available at http://www.bloomberglaw.com/public/document/Nicole_Cogdell_et_al_v_The_Wet_Seal_Inc_et_al_Docket_No_812cv0113, and the amended complaint at http://www.bloomberglaw.com/public/document/Nicole_Cogdell_et_al_v_The_Wet_Seal_Inc_et_al_Docket_No_812cv0113/1.

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