Walgreen Co. will pay $20 million to settle a federal lawsuit alleging widespread racial bias at the nation's largest drugstore chain under the terms of a proposed deal announced Thursday.

The U.S. Equal Employment Opportunity Commission filed the class-action lawsuit in March, alleging that Walgreen, based in Deerfield, Ill., discriminated against thousands of black workers in hiring and assignment decisions.

The settlement deal still needs a judge's approval, but both the EEOC and Walgreen have agreed to it. The proposal was filed in U.S. District Court in East St. Louis, Ill.

"We commend Walgreens for working cooperatively with us to reach an amicable settlement of this case without protracted litigation," EEOC Chair Naomi Earp said in a statement.

Walgreen Chief Executive Jeffrey A. Rein also praised the settlement.

"We are pleased to reach a resolution that is consistent with our past and future diversity and equal opportunity objectives," Rein said in a statement.

The lawsuit stemmed from complaints that originated in St. Louis, Kansas City, Detroit and Tampa, Fla. But EEOC officials in St. Louis said they found evidence of the same trend around the country.

The EEOC's lawsuit was consolidated in East St. Louis with a private suit filed on behalf of Walgreen employees, said Morris Baller, an attorney with Goldstein, Demchak, Baller, Borgen & Dardarian in Oakland, Calif.

Baller said the $20 million will be split among lawyers who handled the case and the class of between 7,500 and 8,000 of Walgreen's employees who were affected by the company's policies.

The lawsuits allege that Walgreen assigns black managers, management trainees and pharmacists to low-performing stores and to stores in black communities, and denies them promotions, based on race.

Walgreen is the nation's largest drugstore chain by sales. It has more than 5,807 stores in 48 states and Puerto Rico. It had sales of $47.4 billion in the 2006 fiscal year.

The suit followed an investigation by EEOC's St. Louis and Miami district offices into complaints from two dozen current and former employees from around the country, and after attempts to reach a voluntary settlement failed.

Walgreen shares rose 94 cents to $45.10 Thursday.