Kohler Co. has agreed to pay $886,500 to more than 2,000 women who were refused jobs because they were considered too short. The plumbing fixture company, based in Kohler, Wis., agreed to settle a Labor Department suit accusing it of sex discrimination for its practice of hiring only workers who were at least 5 feet, 4 inches tall. The rule was intended to make sure employees could handle physical labor, the company said. The back pay, benefits and interest will be paid to women who applied for machine operator positions and other jobs at Kohler between January 1994 and December 1995. Kohler also will hire 111 of the applicants and fund a study on making jobs safer and eliminating barriers to women.