Chipotle could be headed back to court. On Wednesday, a lawsuit was filed against the fast casual chain in district court in New Jersey claiming that Chipotle owes employees who have been working more than 40 hours time and a half.
The lawsuit claims that a federal rule mandating any non-manager making less than $47,476 a year is up for paid overtime actually took effect, and that employees were wrongly denied pay starting December 1. The Obama administration rule was blocked by a Texas judge, which prevented the U.S. Department of Labor from enforcing it.
However, lawyers representing Chipotle employees, which are seeking a class-action lawsuit, claim the rule went into place December 1 since the court that ordered the injunction has not repealed the rule. The lawsuit claims the injunction did not apply to private employers and wouldn’t until a final ruling was issued.
The announcement sent stock tumbling around 1.7 percent Wednesday, or more than $8 a share.
Perhaps in anticipation of the rule, Chipotle converted its management trainees to hourly workers. After the ruling, though, the chain reinstalled employees to former salaries.
Joseph Sellers, a partner at Cohen Milstein Sellers & Toll, who represents the plaintiffs, told USA Today, “For conscientious employers, a suit like this reminds them that the rule is in effect and that they should be paying overtime. I don’t fully understand the mind-set that has given rise to this broad belief that companies are not bound by this.”
Before the rule, companies only had to pay overtime to employees making $23,660 or less. The lead plaintiff is Carmen Alvarez, a Chipotle worker who was training as a general manager. Alvarez claims she was working around 10 hours of overtime per week and earning $43,082 a year. When the injunction was issued, she says Chipotle cut the chord on overtime pay.
Chipotle spokesperson Chris Arnold told USA Today that Chipotle’s employment practices are compliant with applicable laws and that the lawsuit doesn’t prove any wrongdoing on the company’s part.
The issue could all be moot if President Donald Trump’s administration eliminates the rule. Chipotle was also sued in November in Los Angeles by customers over what they claimed to be misrepresented calorie counts on chorizo burritos.