A Lawsuit Against Chipotle Could Affect Millions of Workers’ Overtime Pay

“This case could benefit millions of hard-working Americans who are being denied money that they’ve earned."

The fast-food chain is being accused of failing to pay overtime to thousands of employees. Joe Raedle/Getty Images

A proposed class action lawsuit filed Wednesday against Chipotle Mexican Grill, Inc. stands to affect the overtime wages of 4.2 million workers in the United States.

The lawsuit accuses the fast-food chain of failing to pay overtime to thousands of employees as required by state and federal law. Central to the case is a contentious federal overtime rule that affects companies well beyond Chipotle.

“This case could benefit millions of hard-working Americans who are being denied money that they’ve earned,” the plaintiff’s attorney, Joseph M. Sellers, said in a statement.

Chipotle employed Carmen Alvarez, the lead plaintiff in the case, as an apprentice, a job that involved cooking and serving food at various Chipotle locations in New Jersey, according to the lawsuit. Alvarez worked an average of 50 to 52 hours a week, initially without overtime pay, because her earnings exceeded the federal overtime threshold at that time.

While Alvarez was working for Chipotle in 2016, the Obama-era U.S. Department of Labor updated its overtime rule, making her—along with millions of workers—eligible for overtime. The rule raised the overtime salary threshold to $47,476. Alvarez earned around $42,640 annually, which meant she qualified.

Chipotle in November 2016 began paying Alvarez and other employees overtime for hours worked in excess of 40 per week, the lawsuit claims.

But the following month, after a federal court in Texas issued a ruling to prevent the Labor Department from enforcing the overtime rule on certain state government employees, Chipotle “reversed course,” according to a statement from the plaintiff’s attorneys. Around mid-December, Chipotle emailed its restaurants, saying apprentices would be re-classified from hourly to “salaried exempt.” Alvarez lost her overtime pay, the lawsuit alleges.

Sellers, the plaintiff’s attorney, argues the Texas decision has no bearing on Chipotle’s or other companies’ obligation to pay overtime under the federal rule. 

“Chipotle is not the only company to avoid paying overtime to its employees by illegally hiding behind a ruling that does not apply to them,” Sellers said in a statement. “Chipotle is denying overtime pay to thousands of workers that live paycheck to paycheck and rely on their weekly income to make ends meet.”

By initially paying overtime, Sellers said, Chipotle showed they understood that the new overtime rule went into effect on December 1, 2016.

The Chipotle lawsuit comes amid questions about the fate of the overtime rule. Secretary of Labor Alexander Acosta told the House Appropriations Committee this week that lifting the overtime salary threshold, which remained unchanged for 12 years, constituted a “shock to the system.” He said the department will ask for public comment on the overtime rule by issuing a request for information in two to three weeks.

Labor advocates argue the overtime rule underwent an exhaustive public comment process, and further delays rob low- and middle-income workers of much-needed overtime pay.

The Texas lawsuit, meanwhile, hangs in limbo.

The Labor Department appealed the Texas ruling during the Obama administration. President Trump’s Department of Justice has asked the court to delay the case “to allow incoming leadership personnel adequate time to consider the issues.”

The Trump administration’s delays have spurred state-level action. California’s Democratic-led legislature is advancing a bill to lift the state overtime salary threshold to either $47,472 or an amount that’s no less than double the amount of a full-time minimum-wage worker’s earnings—whichever is greater. The bill is in the state senate.