Starbucks Settles Suit on Overtime

Starbucks Corp. said Friday that it has agreed to pay as much as $18 million to settle claims that thousands of current and former managers and assistant managers in California stores were forced to spend long hours performing menial tasks and then cheated out of overtime pay.

Starbucks is one of hundreds of retailers, restaurants and other businesses to be hit by class-action lawsuits filed under the state’s wage-and-hour laws, which require employers to pay time and a half after eight hours of work in a day.

This applies even to salaried workers who hold the title of manager or supervisor if they spend at least 50% of their time performing tasks that are not related to managing.

Days after the Starbucks suits were filed, a jury in Oakland hit Farmers Insurance Exchange with a $90-million overtime bill on behalf of 2,400 claims adjusters.

Several other companies have agreed to settle white-collar overtime suits. Pacific Bell agreed in December to pay $35 million to end a lawsuit by 1,500 engineers who alleged they worked 50 hours a week but were paid for 40. PacBell also has the second-largest settlement, agreeing in 1997 to end an overtime suit by sales support managers by paying $27.8 million.

In June, Rite Aid Corp. settled with 3,000 managers and assistants for $25 million, and Bank of America Corp. settled with as many as 6,000 personal assistants for $22 million in October.

“Employers are losing more and more of the wage-and-hour classification cases,” said California Chamber of Commerce Vice President Fred Main.

“I would expect that we will see more and more of the cases move more quickly. [This] has become a ripe area of class-action lawsuits over the last couple of years. And it moves quickly through one industry and then on to the next one,” he said.

The nation’s largest specialty coffee retailer denied liability in the pair of lawsuits filed in Los Angeles in July and said it agreed to the settlement to resolve the claims without incurring protracted litigation.

“Given the unique aspects of California wage-and-hour laws, which differ significantly from federal and other state laws, we believe this settlement was the best solution for all parties involved,” Starbucks Senior Vice President Jennifer O’Connor said in a statement.

“Starbucks was one of many companies that has faced this type of class-action lawsuit in California in recent years.”

It was unclear, beyond making settlement payments to an estimated 1,000 current employees and an unspecified number of former employees, whether Starbucks would change the way it paid managers and assistant managers in California stores. Of the 5,000 Starbucks worldwide, 821 are in California.

A spokeswoman for Starbucks declined to answer questions beyond a statement issued Friday, which said the settlement was subject to a confidentiality pact. West Los Angeles lawyers Dennis F. Moss and Rene L. Barge, who represented a group of the plaintiffs, also declined to comment because of the agreement.

In interviews in July and in the lawsuits, Starbucks managers and assistant managers alleged the $2-billion company routinely violated wage-and-hour laws by requiring them to work more than 40 hours a week and spend more than half their time on the floor--ringing sales, cleaning out cappuccino machines, mopping up and other such chores.

Starbucks, which was named to Fortune magazine’s “best places to work in 2002” list, said it would take a one-time charge of 3 cents per share in the second quarter to reflect the settlement.

Starbucks fell 42 cents to $24.98 on Nasdaq after the settlement was announced.