Sealy of Minnesota, a manufacturing subsidiary of Tempur Sealy International Inc., has agreed to pay $175,000 to resolve a case of severe racial harassment, the U.S. Equal Employment Opportunity Commission said Thursday.

The federal agency said that a Ku Klux Klan hood, a noose and racist nicknames and jokes were used to harass black and Hispanic workers at the mattress manufacturing plant in St. Paul.

"We did an investigation and we found a number of incidents and actions that occurred at the workplace that constituted unlawful harassment and hostile work environment," said Julie Schmid, acting director of the EEOC's Minneapolis Area Office.

One person harassed 27 other employees, Schmid said, but senior management at Sealy of Minnesota did not act to stop the behavior even after several employees ­complained.

"The purpose of the law is for the employer to end that discrimination immediately or as soon as possible," Schmid said. "That didn't happen here."

According to Schmid, the harassment happened over several years and the investigation took about 18 months to complete. It included two instances of a noose being used to intimidate black workers, the use of a pejorative term for blacks, the display of a KKK hood and racist jokes. The investigation also found that Sealy discriminated against black and Hispanic employees in its selection of lead positions at the plant.

"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," Rick Maynard, a spokesman for Tempur Sealy said. "The company terminated several employees who were in supervisory and management roles during the time of the alleged unacceptable behavior and replaced the management team at the facility."

"I don't have any evidence of that," Schmid said, explaining the terminations did not happen during the EEOC's investigation. "Once we did make the finding, [Tempur] Sealy took the charge seriously and worked with us cooperatively to resolve the issue."

Apart from paying $175,000, Sealy is to provide anti-discrimination training to its employees and institute a "more objective application process for all lead positions," according to the EEOC.

Gabriel Sanchez is a University of Minnesota student on assignment for the Star Tribune.