Putative Class and Collective Action Under Enjoined U.S. DOL Overtime Rule Appears to Face Strong Argument for Dismissal

On June 7, 2017, a plaintiff brought a putative class and collective action against Chipotle for alleged violations of the Fair Labor Standards Act and New Jersey’s Wage and Hour Law.1  The plaintiff asserts the company misclassified her “apprentice” position as salaried-exempt in violation of state and federal law.  She claims her duties were those of an hourly non-exempt employee and she was entitled to overtime. The plaintiff also claims that Chipotle violated the salary basis test by failing to pay her at least $913 per week in violation of a DOL overtime rule that was enjoined and never went into effect. At least as to the latter claim, the plaintiff's complaint will likely be subject to a strong argument favoring dismissal, in light of the preliminary injunction issued last November by a federal judge in the Eastern District of Texas in Nevada v. Perez.    

The plaintiff claims that “[o]n or around December 12, 2016, Chipotle sent an email to all restaurants stating that, ‘because of the Nevada decision’ it was converting [most of] its Apprentices . . .  back to salaried employees who would be exempt from the overtime provisions of the FLSA.”  Prior to the reclassification, Chipotle paid the plaintiff $820.00 per week.  According to the plaintiff, Chipotle’s email explained that the company originally reclassified employees to hourly in response to the DOL’s overtime rule, which would have more than doubled the minimum salary level for exempt employees from $455 per week ($23,660 annually) to $913 per week ($47,476 annually).  After the Eastern District of Texas issued a preliminary injunction blocking the rule on November 22, 2016, however, the company allegedly reclassified the plaintiff and other employees back to exempt. 

This case would be unremarkable but for the plaintiff’s novel legal allegations regarding the effect of DOL’s overtime rule, which was enjoined before it went into effect by the Texas federal judge. The plaintiff’s attorneys claim the preliminary injunction only applied to DOL, not to private plaintiffs:

Because the Eastern District of Texas’s preliminary injunction was limited to implementation and enforcement of the Overtime Rule by the Department of Labor and its officials, it did not affect the ability of persons not party to the Nevada case, including Plaintiff and similarly situated employees, to bring private lawsuits pursuant to the FLSA’s private cause of action, 29 U.S.C. § 216(b), to enforce their right to overtime pay under the Rule, not did it prevent non-parties from bringing lawsuits under state law. (¶33)

The plaintiff, therefore, claims that the overtime rule went into effect on December 1, 2016.

Contrary to the Chipotle plaintiffs, the clear scope of the Eastern District’s preliminary injunction prevented the DOL from implementing the overtime rule prior to its effective date—and without implementation, the overtime rule could not have gone into effect. The U.S. Court of Appeals for the Second Circuit recently so held in Fernandez v. Zoni Language Centers, Inc., declaring that the overtime rule is “presently enjoined nationwide.”2  The plaintiff further alleges without support that “as a rule duly promulgated pursuant to the requirements of the [Administrative Procedures Act], the Rule went into effect on December 1, 2016.” (¶32).  But, the plaintiff does not explain how a rule that was enjoined from implementation and enforcement can be “duly promulgated.”3 

The instant lawsuit’s reliance on the enjoined overtime rule appears to be unfounded. It remains to be seen how Chipotle will respond to the lawsuit, and if it will attack the pleadings through a 12(b) motion to dismiss.  The business community—and plaintiffs’ bar—will undoubtedly watch this case closely. But the suit does not appear to be supported by applicable law. Littler Mendelson will keep employers apprised of all future developments regarding the status of the overtime rule.

See Footnotes

1 Alvarez v. Chipotle Mexican Grill, Inc., and Chipotle Services, LLC, United States District Court of New Jersey, Case No. 2:17-cv-04095-KM-JBC.

2 No. 16-1689-CV, 2017 WL 2293544, at *3 (2d Cir. May 26, 2017).

3 Testimony by Secretary of Labor Alexander Acosta on June 7, 2017, also shows that the DOL believes the overtime rule is a nullity so long as the Texas district court’s injunction remains in effect.


* Maury Baskin and Rob Friedman are shareholders with Littler Mendelson, P.C., and Sean McCrory is an associate with the Firm. They represent the 55 business groups that have successfully challenged DOL’s presently enjoined Overtime Rule in the consolidated cases of Plano Chamber of Commerce et al. v. Thomas E. Perez, et al. and State of Nevada v. Perez, in the Eastern District of Texas.

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.