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.

FedEx, based in Memphis, Tennessee, 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, Secretary of Labor Hilda L. Solis said in a statement.

The agreement ends the compliance review that spanned seven years.

The pact resolves allegations of hiring discrimination by federal contractors FedEx Ground Package System Inc and FedEx SmartPost Inc, both units of FedEx.

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.

(Reporting By Lynn Adler; Editing by Maureen Bavdek)