ST. PAUL, Minn. - Federal employment rights officials say a Minnesota company has agreed to pay $175,000 to settle a complaint involving severe racial harassment. 

The Equal Employment Opportunity Commission (EEOC) says an investigation by the agency's Minneapolis branch found reasonable cause to believe bedding manufacturer Sealy of St. Paul violated of Title VII of the Civil Rights Act of 1964.

Investigators found that Sealy employees subjected African American and Hispanic workers to severe harassment that included racial epithets, jokes, a Ku Klux Klan hood and even a noose. The EEOC says despite victimized employees complaining to Sealy's upper management the conduct did not stop. 

“Sealy now understands that it is not enough for an employer to have an anti-harassment policy,” said Julie Schmid, acting director of the EEOC’s Minneapolis Area Office. “An employer must have an effective policy, respond to allegations promptly, and take immediate and appropriate corrective action to end the discrimination.”

EEOC Chicago District director Julianne Bowman credits Sealy for working with the agency to create a strong anti-harassment policy that will better address employee complaints and revise hiring practices. 

Sealy spokesman Rick Maynard shared a statement with KARE 11 Friday afternoon. “The company is committed to a culture of diversity and respect for all people. When we learned of the alleged violations of our policies by employees at our St. Paul facility which took place three years ago, we took swift action," Maynard insisted. "The company terminated several employees who were in supervisory and management roles during the time of the alleged unacceptable behavior, replaced the management team at the facility, and  retrained our workforce at the facility. We continue to be committed to making every effort to provide a positive work environment for our employees.”

In addition to paying a $175,000 settlement to be split among the harassment victims, Sealy will provide anti-discrimination training to all employees and additional training on harassment and retaliation to supervisors, managers and owners. Sealy will also create an anonymous phone hotline phone for employees to report discrimination complaints.