PacBell to Settle Overtime Lawsuit


Pacific Bell agreed Monday to pay $35 million to end a lawsuit by 1,500 engineers who alleged they worked 50 hours a week but were paid for only 40. It is believed to be the largest settlement of a white-collar overtime case in California.

The engineers, who earn up to $60,000 a year, will receive at least $107 for every week they worked since June 1993, said Mark R. Thierman, a San Francisco lawyer representing the engineers.

The company admitted no wrongdoing in the proposed settlement, filed in court Monday in Oakland. A spokesman for Pacific Bell declined to comment, pending final court approval of the agreement. A hearing is scheduled for March 15.


The suit is part of a wave of lawsuits against employers in California, including retailers, restaurants, banks and insurers, alleging that workers were improperly classified as managers, professionals or administrators in efforts to cheat them out of overtime pay.

A jury in July awarded 2,400 insurance claims adjusters $90 million in overtime pay, a record verdict that Farmers Insurance is appealing.

Monday’s settlement exceeds the previous record for an out-of-court resolution of a white-collar overtime case, which also was paid by Pacific Bell. In that case, 600 sales support managers settled for $27.8 million in 1997.

The PacBell engineers filed suit in 1997, alleging they worked an average of 10 hours overtime a week without pay. They settled for the equivalent of about six hours a week of overtime pay.

John Kelley, a Valencia man who is the lead plaintiff in the engineers’ case, said he is glad to be getting paid for the time he worked. But, he said, the suit was about more than money.

“Having to work overtime and not getting paid for it seems unfair,” said Kelley, 53, who was laid off in 1995 after 23 years with Pacific Bell.


“If [I] spend a lot of that time working, then my son’s baseball team doesn’t have a coach, and my daughter doesn’t get to see me at her dance recitals,” he said. “I know the work has to be done. I know there is work out there to provide the community with their telephone needs. So, if I am going to take a Saturday away from my family, I should be compensated for it.”

Hundreds of similar lawsuits are pending in California, where overtime rules are more favorable to workers than elsewhere. Under federal law, which many states follow or mimic, workers who are primarily engaged in managerial, administrative or professional duties and make at least $13,000 a year may be exempt from overtime pay.

Under California law, workers may be exempt only if they make at least $26,000 a year and spend at least 50% of their time acting as a manager.

“Employers in California, if they have any doubts at all if they are in compliance, should consult with counsel and check to make sure right away because these settlements are huge,” said Diane Kimberlin, a lawyer with the Los Angeles office of Littler Mendelson, a national firm that represents employers. “Employers who have any reasonably large number of employees in a number of locations are clearly at risk of being targeted, and the potential liabilities can be ruinous.”

The series of escalating settlements in overtime cases “sends a message to employers all across the country that perhaps California is not a great place to do business,” said Joseph Beachboard, editor of the California Employment Law Letter and a partner in the Los Angeles office of Ogletree Deakins, a national law firm that represents management.

Workers’ advocates say companies that exploit overtime exemptions to hold down labor costs are getting what they deserve.


“There has been a flood of lawsuits because I think there is so much abuse out there,” said Rene Barge, a partner with Spiro, Moss, Barness, Harrison & Barge, a Santa Monica firm that represents employees.

Barge has taken cases against several retailers and restaurant chains, where she said price competition is fierce and most costs are fixed.

“Labor becomes this giant pool that they can mess around with and try to cut costs, and I think that’s been the big driving force in this for the last 10 years,” she said. “It’s not just, ‘You’re exempt.’ It’s, ‘You’re exempt,’ and, ‘Oh, by the way, we expect you to work like a slave.”’

Most cases settle once a judge approves of a class of hundreds or thousands of workers because employers want to avoid the costs of litigation and the risk of big jury awards.


Recent Overtime Settlements Recent resolutions of claims by white-collar workers in California for overtime pay:

* Farmers Insurance: jury in July awarded 2,400 claims adjusters $90 million; Farmers appealing


* Pacific Bell: settled Monday with 1,500 outside engineers for $34 million

* Pacific Bell: settled in 1997 with 600 sales support managers for $27.8 million

* Rite Aid Corp.: settled in June with 3,000 managers and assistant managers for $25 million

* Bank of America: settled in October with as many as 6,000 personal bankers for $22 million

* CSK Auto Inc.: settled in January with 1,500 store managers for $11 million

* Taco Bell Corp.: settled in February with 3,000 managers and assistants for $9 million