Longs to Settle Two Overtime Lawsuits

Longs Drug Stores Corp. said Tuesday that it expected to pay $11 million to settle two lawsuits involving alleged underpayment of store managers in California, a move that would eliminate much of the company’s expected second-quarter profit.

The lawsuits, which seek class-action status, were filed on behalf of managers and assistant managers who claimed that they were unfairly categorized as exempt from overtime pay when, for the most part, they performed the same duties as workers who were paid by the hour, attorneys for the plaintiffs said.

“It’s an abuse of low-level management employees,” attorney Kevin Barnes said. “These people are not highly paid and they work extremely long hours.”

Walnut Creek, Calif.-based Longs, which denies any liability, said in a statement that it had agreed to the settlement to avoid protracted litigation. Its stock closed Tuesday at $21.40, up 15 cents, on the New York Stock Exchange.

Longs said the settlement would lower its profit for the quarter ending July 29 by 20 to 23 cents a share. A consensus of analysts polled by Thomson First Call expected Longs to earn 26 cents a share.

The settlement is expected to include about 1,000 current and former managers and assistant managers who worked for Longs’ California stores from Feb. 17, 2000, through the time the settlement is granted preliminary approval, attorneys for the plaintiffs said. Alameda County Superior Court Judge Ronald M. Sabraw is expected to decide whether to approve the deal within the next few months.

A rash of overtime lawsuits has swept through the state’s retail and restaurant industries in recent years after California toughened its wage standards. Under the state’s unique wage law, workers classified as managers are eligible for overtime pay at time-and-a-half if they spend more than 50% of their time on nonsupervisory tasks such as stocking shelves or unloading merchandise.

Workers advocates say that, in attempting to cut costs, retailers typically have too few nonsalaried clerks on hand to handle basic duties, such as helping customers and ringing up sales. As a result, store managers and assistants pitch in.

In July 2002, RadioShack Corp. said it would pay $29.9 million to settle unpaid-overtime claims by California employees. Earlier that year, Starbucks Corp. agreed to pay $18 million to settle overtime claims by 1,000 managers and assistants.

More recently, closeout retailer Big Lots Inc. agreed to pay $10 million to settle claims by 1,451 California store managers. Teen apparel retailers Wet Seal Inc. in Foothill Ranch and Anaheim-based Pacific Sunwear of California Inc. also have settled lawsuits involving overtime pay.

Many employers attempt to apply less-stringent federal wage standards in California, a mistake that can be very costly, said Joe Beachboard, a partner with Ogletree, Deakins, Nash, Smoak & Stewart, a Los Angeles law firm that represents management in labor and employment disputes. He fears that new revisions to federal law meant to better clarify which workers are exempt from overtime pay may further confuse matters in the Golden State.

“California standards are different from federal standards and will continue to be different, even after the new federal exempt standards take effect on Aug. 23,” Beachboard said.

The first case against Longs was filed Feb. 17 in Alameda County Superior Court by Darien Goddard, William Swift and Michael Anselmo. David Robotnick filed his claim in Los Angeles County Superior Court the next month.

Most of Longs’ 471 stores are in California.