by Paul L. Bittner
IceMiller is an IMA member legal consultant…
Employers remember 2016 for more than just a presidential election. It was also the year the U.S. Department of Labor (“DOL”) issued new overtime rules that would affect millions of American workers in all industries. The DOL’s new rules, which were to be effective December 1, 2016, increased the minimum salary required for the white-collar exemptions under the Fair Labor Standards Act (“FLSA”). The DOL’s new rules set the minimum weekly salary at $913 ($47,476 annually). Under the old DOL rules, the minimum salary was only $455 per week ($23,660 annually). Employers carefully planned for this significant change. This included not only reclassifying jobs that were exempt from overtime to non-exempt and eligible for overtime, but also restructuring job duties, consolidating positions, changing business models, and even in some cases, increasing salaries to meet the new threshold.
All of this planning came to a halt on November 22, 2016, a little over a week before the DOL’s new rules were to become effective. In State of Nevada v. U.S. Dept. of Labor, Judge Amos Mazzant of the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction that prohibited the DOL from implementing and enforcing the new overtime rules. This decision surprised experts on both sides of the issue, and as a result, many employers did not move forward with planned changes or reversed changes that had already been implemented. One of these employers was Chipotle Mexican Grill. Chipotle has now found itself on the wrong end of a lawsuit filed by employees affected by the reversal.
The case, Alvarez v. Chipotle Mexican Grill, Inc., was filed on June 7, 2017 in the U.S. District Court for the District of New Jersey. The case was brought as a collective action, where the named plaintiff is seeking to represent a class of employees who worked as “apprentices” at Chipotle’s restaurants in the state. Apprentices, according to the lawsuit, are employees who are training to become general managers of a Chipotle restaurant. Chipotle classifies apprentices as exempt from overtime and pays the apprentices a salary of approximately $43,000 annually. In anticipation of the new overtime rule, Chipotle reclassified the apprentices as non-exempt and changed their compensation structure to hourly. Apprentices were then eligible to receive overtime. Once Judge Mazzant issued the preliminary injunction, Chipotle decided to change the classification back to exempt and pay the apprentices a fixed salary.
The apprentices have now come up with a very creative legal theory to assert that they have been entitled to overtime since December 1, 2016. These employees allege that the decision of the Texas judge was limited only to the implementation and enforcement of the new overtime rules by the DOL. According to the lawsuit, Judge Mazzant did not postpone or otherwise stop the rules from going into effect on December 1, 2016. Therefore, according to the apprentices, the new rules can be enforced by private plaintiffs.
This is a very academic argument, but it boils down to the assertion that the DOL has no power to “implement” the rules. The theory is that the rules, once published in final form, go into effect on their own without any further implementation by the DOL. Unless and until Judge Mazzant issues a final, as opposed to a preliminary, decision which vacates the rules, the rules are still on the books. And, they actually are on the books. The current Code of Federal Regulations only contains the new rules.
Some legal commentators believe that the injunction is valid. They argue that because Judge Mazzant’s decision barred not only the enforcement but also the implementation, the final rules never took effect. This is an issue to which employers need to pay close attention, because if the court in New Jersey permits the claims to move forward, plaintiffs could flood courthouses all over the country. What’s at risk? Overtime pay for all otherwise exempt employees who earn less $47,476 per year. That’s a lot of burritos.
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