Chipotle was hit with a putative class action in New Jersey federal court Wednesday alleging the fast-food chain has illegally relied on a Texas federal judge’s ruling blocking the U.S. Department of Labor from expanding overtime protections to avoid paying its workers overtime.
The suit argues that the DOL’s 2016 extension of overtime eligibility to millions of workers earning less than $47,476 per year is in effect, despite a Texas federal court’s ruling temporarily enjoining the DOL from implementing and enforcing it.
The suit claims the Texas ruling, in favor of a group of states and business groups, has no bearing on private companies’ responsibility to comply with the overtime threshold, and that Chipotle Mexican Grill Inc. and other companies have been erroneously relying on the Texas decision in order to avoid paying workers overtime in violation of the Fair Labor Standards Act and New Jersey labor statutes.
“The first-of-its-kind class action lawsuit could mean that millions of workers in various industries across the country, who earn a salary of less than $47,476, are illegally being denied overtime without their knowledge,” the plaintiff’s attorneys said in a statement Wednesday.
Lead plaintiff Carmen Alvarez filed the putative class action after working as an apprentice training to be a manager at Chipotle restaurants in New Jersey from December 2013 through March 2017. According to the complaint, Alvarez and other apprentices regularly worked more than 40 hours per week but weren’t paid time-and-a-half for overtime.
The company classifies apprentices as executive or administrative employees exempt from overtime, even though they performed the duties of nonexempt hourly employees by preparing food and working at cash registers, the suit said.
In November, Chipotle began paying Alvarez and other apprentices overtime pay following the DOL’s new overtime rule, which went into effect on Dec. 1, the suit said. The rule updated the federal salary threshold for overtime eligibility for the first time in 12 years, raising it from $23,660 to $47,476, and at the time, the DOL anticipated it would impact 4.2 million workers.
But the same month the rule was to go into effect, a Texas federal judge granted a motion for preliminary injunction filed by the states, who had argued the rule would force their governments to increase their employment costs substantially. The ruling blocked the DOL from enforcing the rule, finding it improperly elevates the salary-level test over a parallel test based on the duties a worker performs. The DOL appealed the decision to the Fifth Circuit, but the appellate court stayed the appeal in April to wait for the Trump administration’s labor secretary nominee to be confirmed.
Following the Texas court’s ruling, Chipotle reversed course, converting Alvarez and her co-workers back to exempt status and denying them overtime pay, improperly citing the Texas ruling, the complaint says.
Alvarez’s attorney Joseph M. Sellers of Cohen Milstein Sellers & Toll PLLC told Law360 on Wednesday that the preliminary injunction should only apply to state employers, because the Texas suit was brought by the states on behalf of state employers and not private companies.
The lawsuit seeks collective and class action status for Alvarez and thousands of other similarly situated current and former Chipotle employees in New Jersey, as well as damages for unpaid overtime wages and fees associated with litigation.
Sellers said Wednesday that Chipotle is denying overtime pay to thousands of workers who live paycheck to paycheck and rely on their weekly income to make ends meet. What's worse is that Chipotle isn’t the only company to avoid paying overtime to its employees by illegally hiding behind a ruling that doesn't apply to them, he said.
“This case could benefit millions of hard-working Americans who are being denied money that they’ve earned,” Sellers said in a statement.
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A statement from Alvarez’s counsel Wednesday said that Chipotle’s "cost-cutting decision" came after an outbreak of E. coli that sickened customers in 2015. In 2016, Chipotle’s profits fell 95 percent from the previous year, and in the first quarter of 2017, the company’s profits were down 76 percent compared with the same period last year, the statement said.
Alvarez is represented by Joseph M. Sellers and Miriam R. Nemeth of Cohen Milstein Sellers & Toll PLLC, Melissa Lardo Stewart and Justin M. Swartz of Outten & Golden LLP, and Glen D. Savits of Green Savits LLC.
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The case is Carmen Alvarez v. Chipotle Mexican Grill Inc. et al. in the U.S. District Court for the District of New Jersey. The case number wasn’t immediately available Wednesday.