Carmen Alvarez said she was crushed when her employer, ChipotleMexican Grill Inc., reversed its decision to pay her and her fellowworkers overtime late last year, despite a new federalrule that she believed enabled her to receivetime-and-a-half for work over 40 hours.

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The 55-year-old, who worked for the fast-food chain in NewJersey since 2013, said she finally received the boost, along withmillions of other workers newly eligible for overtime pay. It wasthen quickly pulled away thanks to a court decision that temporarilyhalted the U.S. Department of Labor from enforcingthe regulation, according to a lawsuit filed in the U.S. DistrictCourt of New Jersey Wednesday.

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The lawsuit claims the overtime rule is still in effect, despite theinjunction, and companies that decided not to comply are violatingfederal labor laws. In 2016, the Labor Department updated thefederal salary threshold for overtime eligibility for the firsttime in 12 years, from $23,660 to $47,476. It made 4.2 millionworkers newly eligible for overtime pay.

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“This case isn’t just about Chipotle, though. Millions ofAmericans are working long hours and not getting paid the money towhich they are entitled,” said Alvarez, who no longer works forChipotle, in a statement accompanying the suit. “It’s time for thatto stop.”

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The regulation came under fire in a lawsuit filed by 21states and a coalition of business groups thatargued the Labor Department’s enforcement of the rule would beharmful to their bottom lines. That case is pending before the U.S.Court of Appeals for the Fifth Circuit.

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Companies were expected to comply with the regulation by lastDec. 1. A Texas judge in late Novemberblocked the rule, and the Labor Department filed anappeal in the Fifth Circuit. The case is pending there.

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The injunction inspired many companies to hedge their bets andkeep the status quo for their workers as the issue was tied up inthe courts, observers have said.

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Yet, the lawsuit filed against Chipotle argues that privatecompanies must still comply with the rule unless it is overturnedand the appeals court ruling applies only to certain stategovernment employees.

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“Chipotle is denying overtime pay to thousands of workers thatlive paycheck to paycheck and rely on their weekly income to makeends meet,” said Joseph Sellers, a partner at Cohen MilsteinSellers & Toll, which represents the lead plaintiff in thesuit. “More broadly, Chipotle is not the only company to avoidpaying overtime to its employees by illegally hiding behind aruling that does not apply to them.”

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Attorneys from Cohen Milstein, Outten & Golden and GreenSavits are representing the Chipotle workers in this case.

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Chipotle spokesman Chris Arnold said the company’s policy is tonot comment on ongoing legal proceedings. He said all of thechain’s employment practices are compliant with applicable laws. Headded, “A lawsuit is nothing more than allegations, and the fillingof a suit is in no way proof of any wrongdoing.”

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The Labor Department did not respond to a request forcomment.

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Peter Fox, counsel with the National Employment Law Project,said companies that did not comply with the overtime rule couldhave made a mistake. He said a preliminary injunction stops onlythe parties before the court, and in this case that would be theDepartment of Labor. It does not stop the private right to actionto give employees the right to sue under the regulation.

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“I think that would be a risky decision on their part,” Foxsaid. “If a company consulted administrative lawyers, I think theywould have said ‘we don’t have an order to set aside this rule.’They still risk private lawsuits.”

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In April, the Texas appeals court extended the deadline for theLabor Department to file its reply brief—the third and final briefin any appeal—until June 30. The Labor Department, represented inthe case by the Justice Department, asked for an extension to allow“incoming leadership personnel adequate time to consider theissues.”

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Labor Secretary Alex Acosta, at a hearingWednesday before a House Appropriationsubcommittee, reaffirmed a comment he made during his confirmationhearing that the overtime threshold should be addressed, whileacknowledging that nearly doubling it was a “shock to thesystem.”

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Some employers tried to get their compliance plans in place byDec. 1, others implemented them before and others kept theirpolicies in place, said Marc Freedman, executive director of laborlaw policy at the U.S. Chamber of Commerce. There were not anybroad patterns, he said. To comply, an employer could increaseexempt salaries or move them to nonexempt.

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“Employers did both and there are examples of them doing both,”Freedman said. “The ones who increased the salary threshold wouldhave a harder time undoing that change.”

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Mark Konkel of Kelley Drye & Warren said many companies willwait for implementation to change their practices.

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“Payroll was about to massively increase for companies. Now,that regulation has been blocked,” Konkel said. “But I would not besurprised if some of those companies still feel a social pressureto address overtime. They exist in an economy where there is upwardwage pressure.”

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Michael Lotito, co-director of Littler Mendelson’s WorkplacePolicy Institute, a conservative think tank associated with thelabor and employment firm, noted some companies, like Wal-Mart,embraced the overtime rule publicly.

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“They either did or didn’t,” Lotito said. “The companies madedecisions and are living with them. From a practical standpoint,given the fact that we’ve added jobs and wages are up, now we’vegot a labor market where employees are in the driver’s seat. Thatwill create wage and benefit pressure. For some $47,000 is not ashigh as it once was.”

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