Chipotle Workers Ordered to Drop Obama Overtime Rule Case

From labor disputes cases to labor and employment publications, for your research, you’ll find solutions on Bloomberg Law®. Protect your clients by developing strategies based on Litigation...

By Jon Steingart

The federal judge in Texas who blocked the Obama-era overtime rule agreed with Chipotle that workers and their lawyers violated his order by filing a lawsuit under the defunct rule in New Jersey. They must now pay the restaurant chain’s litigation fees.

The decision makes clear that the judge’s prior ruling applies to private sector litigants nationwide as well as to the Labor Department. The Chipotle workers argued that they weren’t bound by it because they weren’t part of the litigation filed by business groups and states to challenge the overtime rule.

The Fair Labor Standards Act grants the DOL authority to adjust certain criteria for determining overtime eligibility. At the time Judge Amos Mazzant of the U.S. District Court for the Eastern District of Texas barred the agency “from implementing and enforcing” updated criteria in its overtime rule, the rulemaking process was virtually complete, the workers said. There was nothing the agency needed to do to implement the rule other than wait for the effective date to arrive, they said.

Moreover, the order couldn’t have blocked them from enforcing the FLSA under the new criteria laid out in the overtime rule because they weren’t part of the litigation that prevented the Labor Department from enforcing it, they said.

Mazzant temporarily blocked the overtime rule Nov. 22, 2016, just shy of its Dec. 1 effective date. The injunction became final on Aug. 31, 2017, with the judge holding that the Labor Department exceeded its authority under the FLSA. The rule would have roughly doubled—to $47,000—the salary under which workers automatically earn overtime when they work more than 40 hours in a week. The Labor Department estimated 4.2 million workers would have become eligible under the change advanced by President Barack Obama.

Ruling Binds Labor Dept., Workers, Judge Says

The workers’ arguments didn’t persuade Mazzant. Even though they weren’t part of the litigation that led to his ruling against the Labor Department, the agency represented the interests of workers who would be affected by the rule, he said. As a result, they were bound by his ruling against the agency, he said.

“Respondents sued to enforce the Final Rule in direct violation of the Court’s Order,” the judge wrote in a March 19 order granting Chipotle’s motion for contempt against the workers and their lawyers. “In doing so, they recklessly disregarded a duty owed to the Court—the long-standing and elementary duty to obey its orders, including a nationwide injunction.”

Mazzant ordered them to withdraw the New Jersey lawsuit within seven days and pay Chipotle’s expenses for pursuing contempt in Texas.

Justin Swartz, a lawyer for the workers in the New Jersey lawsuit, said his camp is evaluating how to proceed. “We respectfully disagree with the ruling and are considering our options,” Swartz told Bloomberg Law in a March 19 email.

Swartz and Melissa Stewart with Outten and Golden LLP in New York; Joseph Sellers and Miriam Nemeth with Cohen Milstein Sellers & Toll PLLC in Washington; and Glen Savits with Green Savits LLC in Florham Park, N.J., represent the workers in the New Jersey lawsuit.

Clyde Siebman with Siebman, Burg, Phillips & Smith LLP in Sherman, Texas, represented the Chipotle workers and their lawyers in the contempt proceeding.

Brian Newby and Laura Hallmon with Cantey Hanger LLP in Fort Worth, Texas; and John Shunk and Kendra Beckwith with Messner Reeves LLP in Denver represented Chipotle in the contempt proceeding.

Abigail Nitka with Messner Reeves LLP in New York represents Chipotle in the New Jersey lawsuit.

The case is Nevada v. DOL, E.D. Tex., No. 4:16-cv-00731, contempt motion granted 3/19/18.

Request Labor & Employment on Bloomberg Law