Dive Brief:

• Chipotle has agreed to pay $15 million to settle a class action suit from 4,838 apprentices alleging the chain misclassified them as salaried employees, exempting them from overtime wages. The case was initially filed in 2017.
• The complaint stemmed from the Fair Labor Standards Act that expanded overtime pay in 2016 to those not in an executive, administrative or professional capacity and who made less than $47,476 per year. Chipotle argued that overtime rule, however, never went into full effect because of an injunction. The company allegedly wrongly classified its apprentices as "exempt."
• The expansion of the FLSA increased the number of employees across industries who were eligible for overtime pay, which has led to a sharp increase in FLSA lawsuits. According to Modern Restaurant Management, there were 8,261 FLSA lawsuits filed in 2017, compared to 1,597 FLSA lawsuits filed in 1997.

Dive Insight:

Labor issues have also been on the rise since the beginning of the pandemic. According to Seyfarth Shaw's 17th Annual Workplace Class Action Litigation Report, at least 1,005 workplace lawsuits were filed in 2020 related to the pandemic with more likely this year. Those suits were filed across 47 states in 28 industries, and wage-and-hour issues are among the most filed.

"As businesses rushed to adopt safety requirements, their actions drew claims that they failed to pay minimum wage or overtime for compensable work hours," the report notes.

As businesses ease back into normalcy, however, it presents an opportunity for companies to be proactive with employment compliance and defining more ambiguous roles, such as Chipotle’s apprentices. According to LawyersandSettlements.com, though those apprentices are considered to be entry-level managers who typically work 50 to 55 hours a week, they make just $1 to $2 more than hourly employees who are eligible for overtime for working the same hours.

Chipotle isn't the only restaurant chain that has had to navigate wage dispute issues related to overtime pay. Last month, Jimmy John's agreed to pay $1.8 million to settle an overtime pay dispute. That lawsuit was initially filed in 2014, and became a collective action in 2015. In 2019, McDonald's paid a $26 million settlement related to a violation of overtime rules, while a Panera franchisee recently agreed to pay $4.6 million in 2020 to settle a class-action suit related to overtime pay. Still, Chipotle is the only non-franchised company among this group, theoretically providing the chain with more control over its labor compliance policies.

Chipotle is no stranger to labor complaints. In 2019, for example, employees from at least 20 Chipotle restaurants in New York filed complaints against the chain regarding violations of the Fair Workweek Law, while in 2016, nearly 10,000 employees sued Chipotle for wage theft. In January, Chipotle agreed to pay $1.37 million in restitution and penalties to settle claims that it violated Massachusetts child labor laws.

However, Chipotle is also a standard bearer when it comes to employee benefits, adding a bonus program, offering employees a free meal per shift, providing free English as a second language classes for employees and their family members, reimbursing tuition up to $5,250 annually, and providing dental, vision and medical insurance. Chipotle also provides access to mental healthcare and financial wellness for all of its employees. Last year, the company said was seeing all-time low turnover at the crew and manager levels.