Bank of America has been sued in federal court in Manhattan by a fired financial adviser who accuses the second-largest US bank of breaking a promise it made in a landmark racial bias settlement — a promise, she says, not to force employees to give up their day in court.
Source: Reuters
The complaint, filed late on Thursday, October 29, 2026, by Katherine Mackey, challenges a November 2024 policy under which Bank of America and its Merrill Lynch unit require employees to send many disputes — including discrimination and harassment claims — to mandatory arbitration through JAMS, and to "forever waive" their right to sue in court or join class actions, Reuters reported.
The 2013 promise at the centre of the case
Mackey argues the 2024 policy wipes out commitments Merrill Lynch made in its $160 million settlement in August 2013, which resolved claims by hundreds of Black brokers who alleged bias in pay, promotions and the way large client accounts were handed out. That case, McReynolds v. Merrill Lynch, ran for eight years in federal court in Chicago: a judge first refused to let it proceed as a class action in 2011, an appeals court reversed that decision, and the plaintiffs' side grew from about 700 brokers to more than 1,000 before the settlement.
The 2013 case targeted two Merrill practices in particular — a "teaming" policy that let brokers form teams and share customers, and an account distribution policy that reassigned the clients of departing brokers to those who stayed. The brokers said both systems channelled business away from Black advisers and cut their pay and future earnings.
"Congress and the Supreme Court have long encouraged the use of arbitration to resolve employment disputes," a Bank of America spokesperson said, according to Reuters. "Arbitration policies using JAMS as the forum for arbitration are routinely upheld in court, as has this one. We look forward to vigorously defending all aspects" of the policy.
What Mackey alleges happened to her
According to the complaint, Mackey joined a Merrill Lynch programme for aspiring financial advisers in 2023, when she was 65. She alleges that younger male colleagues and supervisors subjected her to discrimination and harassment and starved her of resources because of her gender and age. These are allegations in a legal filing; they have not been proven in court.
Mackey says she missed her production goals and was given until the summer of 2025 to catch up, but that the deadline was accelerated and she was fired in February 2025. She is represented by Linda Friedman, a Chicago lawyer who also represented the brokers in the 2013 settlement.
What she is asking the court to do
Mackey wants the court to void Bank of America's mandatory arbitration policy so her claims can be heard in federal court, instead of in the arbitration process where she has already filed as a precaution. The first fight in the case will not be about whether discrimination happened — it will be about where the case is allowed to be fought at all.
Why companies prefer arbitration — and why workers challenge it
Many US businesses prefer arbitration to litigation because it can stay confidential, makes gathering evidence harder for the other side, and usually costs less, Reuters noted in its report. Worker advocates counter that secret, one-by-one proceedings stop employees from joining forces in class actions and keep patterns of alleged bias out of public view. JAMS, the forum named in the bank's policy, takes its name from its former title, Judicial Arbitration and Mediation Services.
This is not the first time the bank's arbitration policy has been tested: Bank of America and Merrill Lynch previously argued in a New York federal court that the policy also covers a separate bias suit brought by two Black financial advisers, Law360 reported. That history is part of why Mackey's lawyers frame her case as a test of whether a settlement promise can limit a policy an employer adopts years later.
Why this matters beyond Wall Street
Mandatory arbitration clauses sit inside the employment paperwork of banks, brokerages, tech firms, hospitals and logistics companies across the United States — including for many South Asian and Punjabi professionals working in American finance and technology. Most people sign them on their first day without reading them. This case will test, in public, how much protection such a clause gives an employer when an earlier settlement is said to have promised the opposite.
What happens next
Bank of America is expected to ask the Manhattan federal court to enforce its arbitration policy and move Mackey's claims out of court; Mackey's side will argue the 2013 settlement bars exactly that. No judge has ruled yet, and the bank says it will defend the policy vigorously. The underlying discrimination claims remain allegations until a court or an arbitrator decides them.
Sources: Reuters, 'Bank of America sued over mandatory arbitration for employee disputes', October 30, 2026; SKN summary of the complaint, October 30, 2026; Stoll Berne background on the 2013 McReynolds v. Merrill Lynch $160 million settlement.