(RNS) Abercrombie & Fitch will change its “look policy” and allow employees to wear hijabs after a three-year legal battle with two Muslim women was settled out of court.

The settlement requires Abercrombie to report religious accommodation requests and discrimination complaints to the Equal Employment Opportunity Commission for three years, and includes $71,000 in compensation for the two women. The settlement also averts a Sept. 30 trial.

Abercrombie fired Umme-Hani Khan, a stockroom worker in its San Mateo, Calif., store, in 2010 for refusing to work without her religious headscarf. Khan, who had worked at the store for four months without incident, filed a religious discrimination complaint with the EEOC, which sued the retailer in 2011.

In its defense, Abercrombie countered that the headscarves violated its “look policy,” which was an important part of its marketing strategy. Abercrombie also defended its “look policy” as “commercial free speech.”

The EEOC also sued Abercrombie in 2010, alleging its Milpitas, Calif., store did not hire Halla Banafa, a Muslim woman who interviewed there in 2008, because of her headscarf.

Earlier this month, U.S. District Court Judge Yvonne Gonzalez Rogers agreed with Khan and ordered Abercrombie to revise the policy, while in April, U.S. District Court Judge Edward Davila dismissed several of Abercrombie’s defenses in the Banafa case.

Khan received $48,000 in compensation, and Banafa received $23,000.

“People shouldn’t have to choose between their faith and their paycheck,” said Khan. “I’m happy that the judge saw that I was wronged.”

Abercrombie has also been on the losing side of a third EEOC lawsuit, brought on behalf of another Muslim woman, Samantha Elauf of Tulsa, Okla., who alleged she was not hired because of her headscarf, but has appealed the case to the 10th U.S. Circuit Court of Appeals in Denver.

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