US coffee retail chain Peet's Coffee & Tea has said it has settled a lawsuit that claimed it had failed to pay employees for working overtime.

The Emeryville, California-based company said it would record a third-quarter charge of around US$3.4m, reflecting the settlement as well as executive severance expenses.

Peet's said it denied claims that it improperly classified some California employees as exempt from overtime pay, but said it agreed to settle in order to avoid the cost, distraction and uncertainty related to a lawsuit, reported Reuters.

The company also said it expects third-quarter sales growth of around 13%.