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New management attempts to re-brand Wet Seal, settles lawsuit

May 17, 2013

It was no surprise that after sliding sales and a major national class-action, the clothing retailer Wet Seal decided to undergo a major re-branding effort. The first major action was to replace the company’s Chief Executive Susan McGalla with John D. Goodman early this year, and one of his first major actions was to settle the racial discrimination lawsuit. The company released a statement that the settlement acted as an “important role in redefining the company and positioning it for success.”

The lawsuit had been filed over alleged systematic discrimination against black employees as a part of a campaign to have individuals with blond hair and blue eyes represent the brand. The U.S. Equal Employment Opportunity Commission conducted its own investigation involving one woman, making a finding that her termination had been based on her race.

As a part of the alleged systematic discrimination, minority employees were denied equal pay. Those that wanted to apply for a promotion to manager were denied the opportunity and some of the employees were even fired. Early this month, those claims were settled with a $7.5 million payout with $5.58 being set aside in a fund for those current and former employees who were a part of the lawsuit.

While the company did not admit fault as a part of the settlement, management did include forward-looking provisions that address discrimination. The company agreed to devote more resources to investigating internal complaints involving instances of discrimination. The company also said that it would place a greater focus on ensuring non-discriminatory hiring practices focused on diversity.

Source: Los Angeles Times, “Wet Seal to pay $7.5 million to settle race discrimination suit,” Tiffany Hsu, May 9, 2013

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