CHICAGO (CN) - Merrill Lynch financial advisors who claim they were denied pay and promotions because they are black can sue the investment firm as a class, a decision that could cost the investment firm dearly, the 7th Circuit ruled.
The 700-person class, led by Nashville financial advisor George McReynolds, alleged that Merrill Lynch's company policies result in unintentional discrimination, known as disparate effect, against black bankers. Specifically, the class challenged the company's "teaming" and "account distribution" policies under Title VII of the Civil Rights Act.
At each Merrill Lynch branch, brokers are encouraged to divide themselves into client-sharing teams. "The aim in forming or joining a team is to gain access to additional clients, or if one is already rich in clients to share some of them with brokers who have complementary skills that will secure the clients' loyalty and maybe persuade them to invest more with Merrill Lynch," the 7th Circuit summarized.
While not all brokers join teams, teaming up allegedly presents substantial benefits.
But white brokers tend to form all-white teams, according to the complaint. Though brokers probably focus simply on the bottom line and "would doubtless ask a superstar broker to join their team regardless of his or her race ... there is bound to be uncertainty about who will be effective in bringing and keeping shared clients; and when there is uncertainty people tend to base decisions on emotions and preconceptions, for want of objective criteria," Judge Richard Posner wrote for the three-judge panel.
The 700-person class, led by Nashville financial advisor George McReynolds, alleged that Merrill Lynch's company policies result in unintentional discrimination, known as disparate effect, against black bankers. Specifically, the class challenged the company's "teaming" and "account distribution" policies under Title VII of the Civil Rights Act.
At each Merrill Lynch branch, brokers are encouraged to divide themselves into client-sharing teams. "The aim in forming or joining a team is to gain access to additional clients, or if one is already rich in clients to share some of them with brokers who have complementary skills that will secure the clients' loyalty and maybe persuade them to invest more with Merrill Lynch," the 7th Circuit summarized.
While not all brokers join teams, teaming up allegedly presents substantial benefits.
But white brokers tend to form all-white teams, according to the complaint. Though brokers probably focus simply on the bottom line and "would doubtless ask a superstar broker to join their team regardless of his or her race ... there is bound to be uncertainty about who will be effective in bringing and keeping shared clients; and when there is uncertainty people tend to base decisions on emotions and preconceptions, for want of objective criteria," Judge Richard Posner wrote for the three-judge panel.
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