A lawsuit filed against Chipotle on Wednesday claims that a federal rule expanding overtime pay to millions of workers is in effect, despite an injunction late last year that banned the Labor Department from enforcing the regulation.
The proposed class action lawsuit, which was filed in the U.S. District Court in New Jersey, alleges that Chipotle should be paying time and a half to employees who work more than 40 hours a week and earn less than $47,476 a year —as would be required by the rule. Attorneys representing Chipotle employees in New Jersey argue that the rule still took effect as scheduled on Dec. 1 because the court that ordered the injunction has not issued a final decision or repealed the regulation. The suit also claims that the injunction applied narrowly to the Labor Department and does not block other parties, such as workers, from enforcing the rule in court.
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At issue is a Labor Department rule finalized under the Obama administration that would more than double the income threshold — from $23,660 a year to $47,476 a year — under which workers must be eligible for over time pay. Depending on the outcome of the case, the suit could potentially lead to significant scheduling changes and back pay for Chipotle employees. It could also have implications for millions of other workers who would become eligible for overtime pay under the rule.
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The Chipotle suit is questioning the scope of an injunction filed by a federal judge in November that barred the Labor Department from “implementing and enforcing” the rule roughly a week before it was scheduled to take effect. The order was meant to give the court more time to reach a final decision on the regulation, which was challenged by 21 states and a coalition of business groups, including the Chamber of Commerce. The result was a limbo where the rule was put on hold but not permanently eliminated, according to legal experts not associated with the case.
However, the lawsuit claims that while the injunction blocked the Labor Department from enforcing the rule, it did not technically prevent the rule from going into effect. The lawyers argue that that the Labor Department does not have to take any further steps to implement the rule because it was already finalized and officially published by the time the injunction was filed.
Catherine Ruckelshaus, general counsel for the National Employment Law Project, a worker advocacy group, also believes the injunction was not enough to keep the rule from going into effect since it had already been finalized. Depending on the outcome of the case, she expects the suit could make more workers eligible for overtime pay. “It potentially has a very broad impact,” she said.
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The Labor Department appealed the injunction last December while it was still under the Obama administration. But in February, the Trump administration asked for more time to “consider the issues” and decide how to treat the case. It has until June 30 to file a brief with the court.
During his confirmation hearing in March, Labor Secretary Alexander Acosta said it was “unfortunate” that the rule had not been updated in more than a decade, but he also said the threshold proposed by the previous administration may “create a stress on the system.”
In anticipation of the rule, some employers raised workers salaried, adjusted employees’ schedules and made other changes to comply with the regulation. Some companies decided to stick with their new policies but others are waiting to learn the final outcome of the case.
Some Chipotle employees in New Jersey started receiving overtime pay in mid-November for hours worked over 40 hours a week, according to the lawsuit. Carmen Alvarez, the lead plaintiff in the suit, said she regularly worked about 50 hours a week as an assistant manager at a Chipotle in East Hanover, N.J. During that time, she said it was helpful to have the additional pay. Her hours also became more predictable after the change because her bosses became less likely to ask her to come in early or stay late.
But by mid December, a few weeks after the injunction, Alvarez was switched back to a flat salary and told she would no longer receive overtime pay. “I was disappointed when they changed it back because I thought I would spend more time with my family or at least get rewarded for the time that we work,” said Alvarez, who says she was fired by the company in March because of a dispute over her schedule.
The attorneys representing Chipotle workers have also handled other high profile cases against employers, such as an ongoing private class-action arbitration case accusing Sterling Jewelers of gender discrimination in pay and promotion practices.