Goldman Sachs, a global investment bank headquartered in New York City, recently settled a class-action lawsuit over gender pay discrimination for $215 million. It’s one of the largest discrimination settlements in U.S. history, according to the plaintiffs’ attorneys. A trial had been scheduled for June.
The settlement, announced on May 8, still needs to be approved by a judge. It covers approximately 2,800 female associates and vice presidents in the company’s investment banking, investment management and securities divisions.
The plaintiffs claimed the company discriminated against women in pay, performance evaluations and promotions in violation of Title VII of the Civil Rights Act of 1964 and the New York City Human Rights Law.
They said the company:
- Paid women less than men, even though they held equivalent positions and performed similar work.
- Maintained policies for promoting vice presidents that resulted in the disproportionate promotion of men over equally or more qualified women.
- Undervalued female employees’ work in subjective performance evaluations.
“The violations of its female employees’ rights are systemic, are based upon companywide policies and practices, and are the result of unchecked gender bias that pervades Goldman Sachs’ corporate culture,” the lawsuit said. “Managers, whether based on conscious or unexamined bias, most often assign the most lucrative and promising opportunities, assignments and seats to men.” Given wide discretion, managers also disproportionately allocated resources such as administrative support, training opportunities and informal mentoring to men, rather than women, the lawsuit claimed.
The settlement requires Goldman Sachs to hire an independent expert to conduct an analysis of its performance evaluation processes, conduct pay equity studies, address any gender pay gaps, and enhance communications to vice presidents regarding career development and promotion criteria.
Plaintiff Allison Gamba said, “My goal in this case has always been to support strong women on Wall Street. I am proud that the result we achieved here will advance gender equity.”
Jacqueline Arthur, Goldman Sachs’ global head of human capital management, said, “Goldman Sachs is proud of its long record of promoting and advancing women and remains committed to ensuring a diverse and inclusive workplace for all our people.”
In cases like this one, “women were hired at lower initial pay levels, and their periodic pay increases likewise were lower and made to a lower base. There’s not only a persistent lag, but also a compounding effect over time. With the Lilly Ledbetter Act and similar state law changes, such lingering effects are actionable,” said David Miller, an attorney with Bryant Miller Olive in Miami.
The federal Lilly Ledbetter Fair Pay Act states that each paycheck that contains discriminatory compensation is a separate legal violation, regardless of when the discrimination began.
Pay Equity Audits
Employers should consider conducting a pay equity audit under attorney-client privilege, said Joseph Harris, an attorney with Barton in New York City.
“Goldman can afford to weather this storm. However, for most small and midsized employers, a class action would be an existential crisis. Therefore, all employers should treat this settlement as a wake-up call to be proactive about employment law compliance,” he said. “The publicity from this settlement will likely spur additional claims. Therefore, the time to act is now.”
To address pay equity, “the first step is to understand at a deep level how salaries are initially determined and changed over time,” Miller said. “Then, do the statistical work of following cohorts of employees and comparing protected classes within them. Where statistically significant differences are found, determine why, if possible, and remedy them if they are based on illegal discrimination. This definitely does not mean that everyone has to be paid the same. It means that pay differentials need to be based on legitimate, business-related, nondiscriminatory reasons.”
Goldman Sachs used a 360-degree performance review process in which an employee’s supervisors, co-workers and subordinates gave scores ranging from one to five. Managers had the ability to add or remove reviewers, and they could move someone to a higher or lower quartile ranking based solely on the manager’s subjective feelings, the lawsuit said. The highest quartile slots most often went to male employees, and that ranking determined compensation. Performance reviews should be well-documented and based on empirical data, particularly to avoid claims of discrimination or retaliation, said Michael Macomber, an attorney with Tully Rinckey in Albany, N.Y.
“In the context of this case, if the trend of choosing male candidates for raises and promotions was as pervasive as the women in the firm claim, HR professionals should or could have communicated these trends to managers and supervisors to ensure these promotions and raises were solidly grounded on merit and that there is documentation to prove it,” Macomber said.
Tracking data on performance reviews can help employers benchmark industry and companywide trends.
“HR professionals are the chief advocates for fairness in the workplace,” Macomber said. “Any performance appraisal process that relies solely on the feedback of a single manager probably isn’t as fair as if HR or multiple people were involved. That’s not to say that you have to have some large committee, but make sure that one manager’s five-star review or recommendation for a raise or promotion matches the other managers’.”