WPP has settled the lawsuit against former JWT head Gustavo Martinez

The Vladeck Firm/Vimeo

• WPP has settled a lawsuit alleging racist and sexist behavior by ad agency J. Walter Thompson's former chief Gustavo Martinez.
• The lawsuit was filed in 2016 by JWT chief communications officer Erin Johnson, who is reportedly receiving a substantial settlement and has resigned from her role at the ad agency.
• The terms of the agreement are confidential and will not be disclosed.
• The news comes on the heels of WPP CEO Sir Martin Sorrell being the focus of an investigation by the company's board into possible misuse of assets and accusations of improper behavior.

Ad holding giant WPP has settled a lawsuit alleging racist and sexist behavior by ad agency J. Walter Thompson's former chief Gustavo Martinez.

The lawsuit was filed in 2016 by JWT chief communications officer Erin Johnson, who alleged that Martinez engaged in a pattern of misconduct, creating a hostile work environment that amounted to gender discrimination and a violation of her civil rights.

Johnson is receiving a substantial settlement, according to The Wall Street Journal, which first reported the settlement. Johnson has resigned from her role at the ad agency, the company said in a statement. Martinez left his post shortly after the lawsuit was filed in 2016. The terms of the agreement are confidential and will not be disclosed, the company said.

JWT is a celebrated ad agency, with clients ranging from Kimberly-Clark and HSBC to Ford. A company representative forwarded the following statement to Business Insider:

"J. Walter Thompson Company today announced they have reached an amicable settlement agreement with Erin Johnson, Chief Communications Officer, J. Walter Thompson Company, in the Johnson vs. JWT et al. lawsuit.

The terms of the agreement are confidential and will not be disclosed. Additionally, Johnson has resigned from the role of Chief Communications Officer, J. Walter Thompson Company."

Advertising has long struggled with an image problem around issues of diversity and having a work environment hostile to women.

The news comes on the heels of WPP CEO Sir Martin Sorrell being the focus of an investigation by the company's board into possible misuse of assets and accusations of improper behavior. Sorrell has denied the allegation.