Noah's, Tully's latest to settle Calif. overtime lawsuits

Noah's New York Bagels, which obtained preliminary court approval April 27 for a $1 million settlement of class action litigation, is the latest in a growing roster of foodservice employers to settle lawsuits accusing them of violating the overtime law of California.

Also agreeing in recent weeks to settlements totaling about $2.6 million were Seattle-based Tully's Coffee Corp. and former Pizza Hut franchisee RLLW Inc. of San Diego.

"The unique aspects of California's wage-and-hour laws have been problematic for many retailers," Tully's executive vice president, Kristopher Galvin, said recently, echoing the comments of executives from several foodservice companies caught up in overtime litigation since the mid-1990s. "We believe it is in the best interest of [Tully's] shareholders and our California managers to work out this settlement."

At issue is a California law that differs from federal overtime standards applied in most states. Among California's fundamental requirements, managers and assistant managers may be exempted from entitlement to overtime compensation only if they spend more than 50 percent of their time in managerial functions, such as hiring and firing.

In the recently settled cases and others in the past, attorneys for disgruntled managers and assistant managers have sued foodservice employers, alleging that they are cheating workers out of overtime pay. Such lawsuits contended that employers have misclassified workers as managers while having them spend most of their shifts performing the duties of hourly employees.

Lawsuits making such claims are now pending in California courts against Rubio's Restaurants Inc. of Carlsbad, Calif., and Round Table Franchise Corp. of Concord, Calif.

Among other companies that made multimillion-dollar settlements in such cases in recent years were Starbucks Corp., Taco Bell Corp. and Wendy's International. Taco Bell in 2001 agreed to a $13 million midtrial settlement of a lawsuit involving about 3,100 employees.

The Noah's settlement, which was given preliminary approval by a superior-court judge in San Francisco, stemmed from a lawsuit on behalf of 140 managers and assistant managers. Their complaint against the 85-unit chain, owned by Golden, Colo.-based New World Restaurant Group, was filed in 2002 by the San Francisco law firm Righetti Wynne PC.

Righetti Wynne also is the plaintiffs' attorney in the Tully's, RLLW, Rubio's and Round Table cases.

In the workers' cases against Tully's, the coffeehouse chain on April 21 signed a memorandum of understanding with plaintiffs to settle their lawsuit, filed in February 2004 in Los Angeles. Pending court approval, Tully's would pay $800,000 in cash and Tully's stock worth nearly $450,000 to about 80 former or current employees of 23 California coffeehouses.

Tully's, which operates or licenses more than 350 outlets worldwide, "denies all liability in this case, but to avoid protracted and costly litigation, it has agreed to settle," the company said.

RLLW in March finalized a $1.1 million back-overtime settlement, the plaintiffs' attorney Edward Wynne said. That lawsuit was filed in San Diego on behalf of 172 managers.

Financially struggling RLLW at one time operated more than 50 franchised Pizza Huts but has transferred those units to Pizza Hut parent Yum! Brands Inc. of Louisville, Ky.

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