Chipotle employees have sued the fast-casual restaurant chain for allegedly failing to pay overtime compensation, which they say they are entitled to under a recent Labor Department rule at the center of a separate court battle.
The lawsuit, filed Wednesday in a federal court in New Jersey, maintains that the Obama-era Labor Department rule ― which vastly expands overtime pay to salaried workers ― still applies, even though a federal judge in November issued a preliminary injunction to block the Labor Department from enforcing it.
The suit seeks class-action status for employees like lead plaintiff Carmen Alvarez, one of Chipotle’s so-called “apprentices,” or managers-in-training. Alvarez and others were not eligible for overtime under the old salary cap, but were eligible under the new one, said Joseph Sellers, a lawyer from Cohen Milstein Sellers & Toll who is among the representatives for the suit.
After the Obama administration finalized the rule change last year, Sellers said, Chipotle paid Alvarez and others for a few weeks for overtime they were newly qualified to receive. The payment stopped when the federal injunction against the rule was issued in late November.
“The [Fair Labor Standards Act] has two ways of enforcing overtime rule. One is from [the] Department of Labor, and the other is individual parties,” Sellers explained. “The injunction stops the Department of Labor, but says nothing about private enforcement.”
“We contend the rule went into effect,” Sellers added. As the lawsuit notes:
Although [the judge’s order] preliminarily enjoined the Department of Labor from implementing and enforcing the Overtime Rule, the Eastern District of Texas did not stay the effective date of the rule or otherwise prevent the rule from going into effect.
A spokesman for Chipotle told HuffPost in an email that the company doesn’t comment on pending litigation, adding: “All of our employment practices are compliant with applicable laws. I would also note that a lawsuit is nothing more than allegation, and is proof of absolutely nothing.”
Under President Barack Obama’s overhaul of the Fair Labor Standards Act, hourly and some salaried workers are entitled to time-and-a-half pay for any hours over 40 they work in a week. Salaried workers qualify if their annual income is below $47,476. The previous threshold of $23,660 had not been changed since the George W. Bush administration.
Exemptions to salaried employees applied if they earned more than the threshold amount, or if their duties were considered substantively managerial, like overseeing other workers or possessing hiring and firing power. (The Labor Department’s fact sheet address the full range of exemptions.)
The rule change had an effective date of Dec. 1, 2016. The Labor Department is expected to file a response to the injunction later this month.
Chipotle has yet to formally respond to the suit. Sellers said the company will likely argue that the new rule never really went into effect because the injunction stopped it.
“There’s been a widespread misbelief about the overtime rule,” Sellers said. “I think a careful read of the law ― for people who want to follow the law ― [sees] this rule as in effect.”
Sellers suggested there’s been a snowball effect thanks to the rule’s ambiguity. If a business sees that other companies aren’t complying with the rule, it won’t comply either.
“What I hope this case helps to address is [what] the actual state of the law is, rather than what people’s perceptions may be,” he said.
Plaintiffs are seeking back overtime pay, court costs and damages.
The lawsuit is the latest legal and public-relations headache for Chipotle. A 2015 outbreak of E. coli has been blamed for an ongoing sales decline, while just last year, the company was sued by 10,000 employees alleging wage theft. Most recently, Chipotle suffered a security breach in which hackers stole customers’ payment information, including credit card data.