African-American financial advisors at Wells Fargo have reached a proposed $35 million settlement to resolve their class action lawsuit, which asserts that a racial glass ceiling for promotions and pay existed at the company.  A federal judge in the Illinois Northern District Court in Chicago must still approve the class action settlement.  If approved, the $35 million settlement would be split among approximately 365 African-American class members.

Glass ceiling for African-American financial advisors alleged

The class action complaint contends that Wells Fargo maintains stereotypical views about the skills, abilities, and potential of African-Americans in general, which influenced the reported discriminatory treatment of its African-American financial advisors.

According to the complaint, the company’s wealth management business is centrally controlled by headquarters, “where an all white team of senior executives issue mandatory company policies” that apply to Wells Fargo’s Financial Advisor employees.

The discrimination at Wells Fargo reportedly involved, among other things:

• excluding African-American Financial Advisors from lucrative teams of Financial Advisors;

• using client account transfer and distribution policies and practices that disproportionately steer lucrative client accounts away from African-American Financial Advisors; and

• employing centralized compensation policies and practices that unfairly harm African-American Financial Advisors

Basically, the plaintiffs claim that Wells Fargo uses company-wide policies and practices that prevent African-American Financial Advisors from having the same business opportunities as non-African American employees.

Injunctive relief aimed at cracking the glass ceiling

The proposed settlement agreement would require Wells Fargo to implement injunctive relief that the plaintiffs say is tailored to address “the root causes of racial disparities in compensation and attrition on Wall Street (and just at Wells Fargo).”  The plaintiffs worked with a Harvard professor, Frank Dobbin, who specializes in studying the effectiveness of diversity programs.  The injunctive relief includes:

• targeting the team and related account distributions, as well as bank and territory assignments;

• inviting the company’s senior leaders to collaborate with African American Financial Advisors to receive feedback and input;

• eliminating harmful practices like recoupment of training costs; and

• the voluntary use of coaching and a teaming database

Arbitration rears its head again

The proposed settlement agreement also addresses arbitration, which often arises in employment discrimination and class action cases. Lawyers representing the class state that, under the proposed settlement, the plaintiffs and class members will still have the right to sue Wells Fargo in court if the company does not abide by the terms of the settlement agreement.