Chipotle has agreed to pay $15 million after apprentices accused the chain of incorrectly classifying them as salaried employees and exempting them from overtime wages.
The payout will go to 4,838 workers. That group includes all apprentices employed in New Jersey from June 7, 2014 to July 15, 2019, and in all other states (except California, New York, and Texas) from June 18, 2017 to August 25, 2020.
The case started in June 2017 when Carmen Alvarez, on behalf of herself and similarly situated employees, sued Chipotle over the misclassification.
The Fair Labor Standards Act exempts employees from overtime pay if they’re employed in a “bonafide executive, administrative, or professional capacity.” Previously, the Department of Labor defined this exemption to include workers who were paid at least $23,660 and engaged in certain types of duties that fell under the executive, administrative, or professional definition. But on December 1, 2016, the rule changed to at least $47,476 per year.
At first, Chipotle abided by the new rule and switched apprentices like Alvarez to an hourly employee classification on or around November 14, 2016. However, on November 22, 2016, a U.S. district court in Texas enjoined the Department of Labor from “implementing and enforcing” the overtime rule.
Because of this, Chipotle argued the overtime rule never took effect and proceeded to switch apprentices back to the “exempt from overtime” classification on December 12, 2016.
In opposition, the plaintiffs argued that the Texas court decision didn’t prevent the rule from going into effect. Furthermore, the lawsuit contended that Alvarez didn’t meet the financial requirement or duties requirement to be considered a salaried employee and exempt from overtime. At the time, Alvarez earned roughly $42,640 per year. And like all other apprentices, she had job duties similar to an hourly employee, such as food preparation and customer service.
After years of litigation, the two sides eventually went into mediation and decided on terms for a settlement.
The agreement includes a $30,000 service award for Alvarez “in recognition of her extraordinary commitment” to the case and a $10,000 service award for Asher Guni who joined as an additional named plaintiff.
