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Chipotle's Motion for Contempt Granted in Department of Labor Overtime Rule Case


Readers might recall that a few years ago, then President Barack Obama's Department of Labor proposed an overtime rule would have updated the threshold for overtime eligibility, from $23,660.00 to $47,476.00.  However, before the new overtime rule could be implemented, it was blocked in court when a nationwide injunction was issued that prevented the rule from going into effect.  As a result, no employees actually realized any change in their overtime pay, since the proposed overtime rule never became law.

Last summer, a lawsuit was filed against Chipotle by a former worker that alleged she was not paid in accordance with the new overtime regulation, in violation of the Fair Labor Standards Act ("FLSA") and the New Jersey Wage and Hour Law.  Attorneys for the former employee argued that the proposed overtime rule was actually in effect and the injunction only limited the Department of Labor from implementing and enforcing the regulation (but not enforcement of the overtime rule itself, presumably by a litigant in court).  The argument subsequently followed that as a result, the effective date of the regulation was not impacted and the injunction did not prevent the overtime rule from going into effect.  Thus, the former employee and her attorneys argued their case should be allowed to proceed ahead.

Chipotle proceeded to file a Motion for Contempt and argued that the lawsuit should not be allowed to proceed as the former worker and her attorneys "intentionally disregarded" the injunction and instead improperly chose to file a lawsuit to enforce the overtime rule that never went into effect.  In its Motion, Chipotle asked the Court to enforce the injunction, prohibit the former worker and her attorneys from engaging in further litigation in regard to the proposed overtime rule, and award Chipotle its fees and costs for bringing the Motion.

Late last month, the United States District Court, Eastern District of Texas, Sherman Division issued its decision on Chipotle's Motion for Contempt.  In a rather lengthy opinion, the Court held that the former employee and her attorneys "should have known" they were pursuing a claim that "was unwarranted in fact or law."  Further, the Court pointed out that the former employee and her attorneys could not offer any precedent for the argument that the Department of Labor was prohibited from enforcement of the final rule (because of the injunction), but other litigants could pursue enforcement of the rule.  As a result, the allegations raised in regard to alleged violations of the FLSA and the New Jersey Wage and Hour Law were to be withdrawn and Chipotle was subsequently awarded its costs and fees in pursuing its Motion for Contempt.

Had the former employee and her attorneys been able to locate some support (from this circuit or another) to support the argument that they could pursue the claim (even though the Department of Labor was blocked from doing so), that might have been enough to defeat the Motion for Contempt.  However, the lack of precedential support and an inability to show that they did not "intentionally disregard" the injunction is what ultimately doomed them in this instance.  Practitioners take note, while novel legal arguments are not discouraged, if there is no sound basis for bringing an allegation/defense (especially in light of a nationwide injunction), be prepared to be confronted with a similar motion for contempt proceeding.


For additional information:  http://hr.cch.com/eld/NevadaDOL031918.pdf

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