SKN | Bank of America Faces Lawsuit Over Mandatory Arbitration Policy and Employee Discrimination Claims

Key Takeaways:

• Bank of America faces a federal lawsuit challenging its November 2024 mandatory arbitration policy for employees, including provisions covering discrimination and harassment claims.
• Former Merrill Lynch financial adviser Katherine Mackey argues that the policy conflicts with commitments made under a $160 million racial discrimination settlement reached in 2013.
• The case raises broader questions about employment dispute resolution, class-action rights, corporate accountability, and the enforceability of arbitration agreements within major financial institutions.

Lawsuit Challenges Bank of America’s Arbitration Policy

Bank of America is facing legal action from a former financial adviser who alleges that the bank abandoned commitments made under a 2013 racial discrimination settlement involving Merrill Lynch.

Katherine Mackey filed a complaint in Manhattan federal court challenging a November 2024 policy that allegedly required Bank of America and Merrill Lynch employees to submit a broad range of disputes to mandatory arbitration through JAMS.

According to the complaint, the policy covers claims involving discrimination and harassment and requires employees to waive their rights to pursue litigation in court or participate in class actions.

Mackey argues that the policy conflicts with commitments associated with Merrill Lynch’s $160 million settlement in August 2013. That agreement resolved claims brought by hundreds of Black brokers who alleged discrimination involving compensation, promotion opportunities, and the allocation of major client accounts.

Former Adviser Alleges Age and Gender Discrimination

Mackey joined a Merrill Lynch programme for aspiring financial advisers in 2023 at the age of 65.

According to her complaint, younger male colleagues and supervisors subjected her to discrimination and harassment while restricting the resources available to her. She alleges that these circumstances affected her ability to achieve production targets.

Mackey said she initially received until the summer of 2025 to meet the required performance objectives. However, she alleges that the deadline was subsequently accelerated and that she was dismissed in February 2025.

She is seeking to invalidate Bank of America’s mandatory arbitration policy so that her claims can proceed in federal court rather than through arbitration, where she initially filed as a precaution.

These allegations have not been established as findings of fact, and the underlying employment discrimination claims remain subject to legal proceedings.

Bank of America Defends Its Arbitration Framework

Bank of America has indicated that it intends to vigorously defend the case.

A company spokesperson stated that Congress and the US Supreme Court have historically supported arbitration as a mechanism for resolving employment disputes. The bank also argued that arbitration policies using JAMS as the forum are routinely upheld in court, including the policy challenged in this case.

JAMS, previously known as Judicial Arbitration and Mediation Services, provides arbitration and mediation services.

The dispute highlights the competing considerations surrounding arbitration agreements. Employers often favor arbitration because proceedings can be less expensive and more confidential than conventional litigation. Individual arbitration can also limit exposure to collective claims.

Employees and their representatives, however, may argue that mandatory arbitration restricts access to public courts and makes discrimination claims more difficult or costly to pursue.

Corporate Governance and Institutional Risk

The lawsuit extends beyond an individual employment dispute because it challenges the relationship between a financial institution’s historical settlement commitments and its subsequent employment policies.

For major banks, employment dispute frameworks can carry implications for legal exposure, workforce management, regulatory scrutiny, and institutional reputation.

The case also raises questions about the interaction between arbitration agreements and previous settlement arrangements. The central legal issue will include whether the challenged policy conflicts with enforceable commitments associated with the 2013 settlement.

Mackey is represented by Linda Friedman, a Chicago-based lawyer who also represented brokers involved in the earlier settlement.

The outcome could provide additional clarity regarding the scope of mandatory arbitration policies and the legal obligations of financial institutions operating under previous discrimination settlements.

Closing Insights

Bank of America’s legal challenge illustrates the continuing importance of employment governance and dispute-resolution policies within large financial institutions. Although arbitration remains an established mechanism for resolving workplace disputes, its implementation can become contentious when employees argue that it conflicts with earlier corporate commitments or restricts access to judicial remedies.

For investors and institutional stakeholders, the case warrants attention because legal disputes involving discrimination, employment practices, and corporate accountability can create reputational and financial considerations beyond the immediate litigation.

The eventual outcome will depend on the court’s assessment of the arbitration policy, the relevant settlement commitments, and the claims presented by the parties.

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