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Is this discrimatory against those who applied for the position who did not get it? In my view the company gave this person special consideration not available to any of the other candidates.
Discrimination generally means picking one person or thing over another for some reason, whatever that is. Pretty much every decision to hire, fire, promote, demote, etc involves discrimination. So the literal answer to your question is yes.

The issue is whether the employer's decision amounted to illegal discrimination. Most discrimination is perfectly legal. But what an employer cannot do under federal law is refuse promotion to the other candidates because of their race, color, national origin, citizenship, sex, age (if the employee is at least age 40), religion, disability, or genetic test information. Under New York law the employer could not refuse promotion based on the candidate's age, creed, race, color, sex, sexual orientation, national origin, marital status, disability, military status, domestic violence victim status, criminal or arrest record, or predisposing genetic characteristics.

Note that no law, federal or state, requires that a private employer pick the objectively best candidates for the job. The employer is free to choose any criteria it wants other than those listed in the previous paragraph. The employer is therefore free to make a terrible choice for the job.

It appears that what may have happened is that the employer settled the lawsuit (at least in part) by agreeing to give the plaintiff/employee the promotion. There is nothing illegal in doing that. And that does not result in illegal discrimination against the other candidates for the job because they were not denied the job based on any of the criteria listed in the second paragraph.

If the employee is that bad, the employer may have made the bet the employee would be even worse at the new job and give it a good legal reason to fire him or her a few months later free of the problem that the employee was suing the employer. If so, that promotion opportunity may come up again for others before very long.