FedEx Corp will pay back wages and interest to more than 21,000 people rejected for jobs in a $3 million settlement of a bias case brought against two of the company's units by the U.S. Department of Labor.

FedEx Ground Package System Inc and FedEx SmartPost Inc were the focus of a 7-year-long review by the Labor Department's Office of Federal Contract Compliance Programs (OFCCP). This was the largest single financial settlement it had negotiated since 2004, OFCCP said in a statement.

Memphis, Tennessee-based FedEx, the world's No. 2 package delivery company, also agreed to reform hiring practices and make job offers to 1,703 of the affected workers as positions open.

This settlement is proof that we will aggressively protect workers, promote workplace diversity and enforce the laws governing federal contractors, Labor Secretary Hilda Solis said in a statement.

The biggest prior such settlement in 2004 was for $5.5 million with Wachovia Corp, in which OFCCP alleged that more than 2,000 female workers had been underpaid, a Labor Department spokeswoman said.

OFCCP compliance officers found evidence that FedEx's hiring processes and selection procedures violated a presidential order from 1965 by discriminating on the bases of sex, race and/or national origin against specific groups identified at 23 facilities in 15 states, the department said.

Affected workers included men and women; African-American, Caucasian, Native American job seekers; and potential employees of Hispanic and Asian descent.

The reviews also uncovered extensive violations of record-keeping requirements, the department said.

While we admitted no wrongdoing and believe the DOL's position was not supported by the law, we agreed to pay $3 million to avoid what would have been certainly a prolonged and much more expensive resolution process, a FedEx spokesman said. We have and will continue to review and enhance our hiring practices to promote FedEx Ground's commitment to diversity and equal employment opportunity.

The allegations, he said, were based on computer statistical analysis rather than on individual complaints or investigations.

FedEx on Thursday reported a big jump in quarterly profit but downgraded its outlook for the rest of the year due to tepid global economic growth.

Among other recent discrimination settlements with the Department of Labor, Tyson Fresh Meats Inc, a unit of Tyson Foods Inc , agreed in September 2011 to pay $2.24 million to settle sex discrimination claims with more than 1,650 qualified female applicants denied jobs at four Midwest plants.

Alcoa unit Alcoa Mill Products agreed in August 2011 to pay more than $540,000,and in June 2011, pharmaceutical company AstraZeneca agreed to pay $250,000.

(Reporting By Lynn Adler in New York; Editing by Maureen Bavdek and Tim Dobbyn)

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