Goldman Sachs’s $215 million settlement shows the importance of tackling workplace bias

Goldman Sachs recently settled a longstanding gender discrimination class-action lawsuit filed by former employees. In addition to paying $215 million to a class of more than 2,800 former and current women employees as part of the suit, the bank has also agreed to let independent parties audit its pay and performance review systems.

The settlement is a drop in the bucket for Goldman Sachs, which reported $1.5 trillion in total assets at the end of March. Still, it’s a pricey reminder that HR practices can be subject to scrutiny at a high level should they reveal systems that perpetuate bias or discrimination.

A settlement over 10 years in the making. When three former female employees first sued Goldman Sachs in 2010, their complaint alleged men at the bank “are viewed more favorably, receive more compensation, and are more likely to be promoted.” The complaint cited figures detailing the gender makeup of the bank’s management ranks as evidence of this; in 2008, only 14% of Goldman Sachs partners were women.

At nearly all levels of management, the original complaint alleged, the bank had “paid its female professionals less than similarly situated male professionals.” Goldman Sachs’s performance review system was biased, the women suing the bank alleged, detailing a process where female employees consistently received lower scores than men.

At the time, a spokesman for the company said Goldman Sachs believed the suit was “without merit.”

The case was granted class-action status in 2018, and was set to go to trial in June of 2023. As Goldman Sachs litigated the lawsuit over a period of more than 10 years, the bank started addressing some of the concerns laid out in the case. It made a number of changes to its performance review system, including ditching numerical ratings for employees. The bank has set a goal for half of its entry-level recruits to be women. Its most recent partner class included the highest percentage of women in the history of the firm, at 29%, Abbey Collins, Goldman Sachs’s VP of corporate communications, told HR Brew via email.

As part of the settlement, Goldman has agreed to engage independent experts to conduct an additional analysis of its performance evaluation processes, as well as its process for promoting employees from vice president to managing director, to ensure “non-biased outcomes.” It will also conduct pay equity studies, addressing any gender pay gaps “where appropriate,” and strengthen communications with vice presidents about opportunities for career development and promotions.

Jacqueline Arthur, Goldman Sachs’s global head of human capital management, in a statement said, “after more than a decade of vigorous litigation, both parties have agreed to resolve this matter. We will continue to focus on our people, our clients, and our business.”

The legal firm who represented the plaintiffs said in a statement that this is one of the largest discrimination settlements in US history, noting Goldman Sachs will pay more than other Wall Street firms that have settled gender bias class-action lawsuits in the past.

“The settlement sends a strong message to employers that there are real consequences for pay discrimination,” Noreen Farrell, executive director of Equal Rights Advocates, told HR Brew in an email. “It’s no longer enough to pay lip service and take part in performative solidarity with women and people of color.”

Legal learnings. The settlement highlights practices that can pose financial and HR-related problems for companies if concerns are swept under the rug.

“The whole case with Goldman Sachs is kind of a lesson in what happens when you’re not proactive,” Janette Levey, an employment attorney based in New York and New Jersey, told HR Brew.

The case makes clear, Levey said, that when companies ignore problems affecting their workforces, they don’t simply go away.

It’s key that employers are forward-thinking about addressing inequities that exist at their companies, said Julie Kratz, chief engagement officer at Next Pivot Point, which consults with companies on diversity, equity, and inclusion.

HR departments may be in a tough spot when calling attention to pay discrepancies or other patterns of bias that exist within their organizations, Kratz said. C-suites are still dominated by white men, she noted, and these executives might have a hard time recognizing that women or employees of color struggle to secure raises or promotions, as it’s not part of their own lived experience.

Kratz said HR leaders should lean on data, and focus on contextualizing information in a way that’s compelling to senior leadership when addressing these issues.

“HR leaders that we’ve worked with that have done this well are just really skilled at figuring out what motivates the senior leader,” said Kratz.

Letting systemic bias go unaddressed can affect employers not only financially, said Kratz, but also talent-wise.

There’s a “stain on your brand” for companies that face public scrutiny for their treatment of workers, she said. “I would worry about future consumers for sure, and future employees.”