FREMONT -- A car dealership has agreed to pay $400,000 to five former employees to settle a federal discrimination lawsuit that accused the business' general manager of calling the Afghan-American salesmen "terrorists," threatening them with violence and retaliating against them and another employee who complained about the racially charged mistreatment.

Fremont Toyota also must train its managers about workplace discrimination, post a notice about the lawsuit at the dealership and report for the next three years to the U.S. Equal Employment Opportunity Commission, the federal agency that filed the suit.

"The whole $400,000 goes to the victims," said Jonathan Peck, an EEOC attorney representing the employees. "When we litigate, we try to develop remedies for individuals and make sure that policies are put in place so these acts don't happen again."

The dealership's general manager, who was not named in the lawsuit, is no longer employed at Fremont Toyota at 5851 Cushing Parkway, near several car sales lots along Auto Mall Parkway.

A current Fremont Toyota employee said Tuesday that the dealership has a new general manager and is aware of the lawsuit, but had no comment on it.

Elise Balgley, a Newark-based attorney representing the dealership, declined to comment when reached by phone.

The verbal abuse at Fremont Toyota started in October 2007, when the dealership's general manager singled out four Afghan-American salesmen in a staff meeting, calling them names and threatening to "blow them up with a grenade," according to court documents.

When the employees reported the abuse to superiors, they met further harassment and job scrutiny, according to court documents. The salesman all resigned in late October.

"They were subjected to offensive comments based on their national origin," Peck said. "They quit because of the hostility directed at them and the company's failure to remedy it."

A fifth employee -- an Afghan-American manager -- spoke out against the targeted harassment and was fired in early December, just weeks after the salesmen quit, Peck said.

After leaving the company, a few of the former employees joined the United States military, said Michael Baldonado, district director of the EEOC's district office in San Francisco.

"The irony of this matter is that, after being labeled 'terrorists' at our old job, most of us found work serving in Afghanistan protecting U.S. soldiers from the terrorists," said Mohammad Sarwary, one of the former employees.

Contact Chris De Benedetti at 510-353-7011. Follow him at Twitter.com/cdebenedetti.