Pepsi Bias Settlement Awards $3.13 million to Black Job Applicants

by Frederick H. Lowe
Pepsi Beverages has agreed to pay $3.13 million to African-American job applicants and to provide them job training after an investigation proved that Pepsi refused to hire blacks who had not been convicted of a crime, if the company's criminal background checks showed the applicant had been arrested.

The black applicants were excluded in violation of a  federal civil-rights law from working at Pepsi, the world's No. 2 soft drink manufacturer, according to a recent settlement of a job discrimination lawsuit between the Equal Employment Opportunity Commission (EEOC) and Pepsi Beverages.

The agreement also reflects Pepsi' checkered historical relationship with black employees.

Pepsi Beverages, which is based in Somers, N.Y., has since changed its background-check policy, and company officials also agreed to supply the EEOC data on the company's hiring practices under its new criminal background check.

Pepsi Beverages, formerly known as Pepsi Bottling Group Inc., is the world's largest bottler of Pepsi-Cola beverages, accounting for more than half of Pepsi beverages sold in the United States and Canada and 40 percent of Pepsi beverages sold worldwide. PepsiCo, a multinational corporation, which is based in Purchase, N.Y., owns Pepsi Beverages.

“Based on the investigation, the EEOC found reasonable cause to believe that the criminal background check policy formerly used by Pepsi discriminated against African Americans in violation of Title VII of the Civil Rights Act of 1964,” EEOC officials said in a statement on Jan. 11.

Pepsi's criminal background check policy adversely affected more than 300 black-job applicants nationwide from 2006 through 2010 by disproportionately excluding African Americans from permanent employment with Pepsi Beverages, Julie Schmid, acting area director for the EEOC for Minneapolis (Minn.) Area Office

“Under Pepsi's former policy, job applicants who had been arrested pending prosecution were not hired for a permanent job even if they had never been convicted of a crime of any offense,” the federal agency said. “Pepsi's former policy also denied employment for applicants who had been arrested or convicted of minor offenses, which is also illegal under Title VII.

Pepsi has a mixed history of providing blacks job opportunities.

Walter S. Mack, Pepsi-Cola’s president from 1938 to 1951, made Pepsi the No. 1 competitor to Coca Cola. Mack, who considered himself a progressive, noticed that Pepsi's advertising strategy targeting a general audience either ignored African Americans or used ethnic stereotypes in portraying blacks.

Mack believed that appealing to the untapped African- American market could help Pepsi increase its market share against Coca Cola. Coca Cola, which is based in Atlanta, did not hire blacks.

Mack hired Hennan Smith, a black advertising executive for the African-American press, to lead an all-black sales team for Pepsi. World War 2, however, interrupted Mack's efforts. In 1947, Mack hired Edward F. Boyd to lead a-black sales team that created advertising portraying blacks in a positive light.

Not everyone liked the idea. Some hated it.

Pepsi affiliates feared that focusing on African Americans would turn off white consumers. In a meeting at the Waldorf-Astoria Hotel, Mack tried to assuage the 500 bottlers, telling them, “We don't want it to become known as a nigger drink.”

Boyd said he knew the statement did not reflect Mack's feelings. “I didn't forget it, but I didn't hold it against him either,” he told the Wall Street Journal. After Mack left Pepsi in 1951, support for the black sales team faded, and it was cut.