Pacific Sunwear of California Inc. said Tuesday it has agreed to pay $3.9 million to settle two lawsuits filed by former employees involving overtime pay.
The lawsuits, filed in 2001 and 2002 in Orange County Superior Court, alleged that the company improperly classified some California-based employees as exempt from overtime pay. PacSun denies the allegations.
The Anaheim-based seller of surf and skate apparel said that it agreed to the settlement to avoid the "cost, distraction and uncertainty" associated with protracted litigation during the important summer and back-to-school selling seasons.
The suits are similar to a number of claims filed against retailers with operations in California since 2000, when state law that made managers exempt from overtime pay defined managers as those with jobs in which more than half of their duties are managerial or professional. Many employees in managerial positions have sued, arguing that less than half of their jobs are spent managing others.
PacSun said most of the settlement amount had been accrued as of Feb. 1 and won't hurt this quarter's financial results. The court is expected to review the settlement within 60 days.
Pacific Sunwear shares rose 49 cents to $23.26 on Nasdaq.