California Court Okays Chipotle Wage Lawsuit Deal

San Francisco, CAOn October 2, the Superior Court of California gave preliminary approval to an agreement to settle Turley v. Chipotle Services, LLC., a long-running California labor lawsuit. The workers argued that Chipotle's practice of understaffing caused them to miss meal and rest periods in violation of the California Labor Code. In addition, the Complaint sought penalties under the California Labor Code Private Attorneys General Act.

The court had refused to approve two previous settlement attempts as insufficient for the workers. Under the terms of the latest $1.75 million agreement, the net payment to most of the 7,000 employees covered will be roughly $150. Chipotle will also pay $50,000 in civil penalties.

A long and tortured history

Tanika Turley and her co-workers first filed their lawsuit in 2015. In 2018, the court certified a class of approximately 7,000 current and former California employees who were hired before Aug. 1, 2014. The plaintiffs then amended the Complaint to add Susan Carrithers as representative of the group of workers who had signed agreements to arbitrate disputes as part of their employment arrangement with Chipotle. Carrithers died after contracting Covid-19, and her replacement declined to continue as a representative of that subclass after she signed an individual settlement with the company.

In February 2020, the court rejected the first settlement agreement. It rejected a second settlement attempt in June. The latter would have provided many employees with $6 or a coupon for a burrito. Plaintiffs’ counsel estimated that the value of the average claim was up to $868.

The October 2 settlement offer covers only the original 7,000 employees, not the additional subclass that had signed mandatory arbitration agreements. Plaintiffs’ attorneys have agreed to reduce their fees and the State of California will receive $50,000 in civil penalties, up from $10,000. The average award for each of the affected workers increases, too. But an uncomfortable question persists. 

Was it worth it for $150?

The value of PAGA penalties

That is a question that can only be answered by each of the individual plaintiffs. If five years of litigation was worth it, the reason may be the impact of PAGA penalties. This is more acutely so for the workers who signed mandatory arbitration agreements perhaps without knowing what rights they were waiving. These employees were ultimately left out of the settlement. They got nothing.

PAGA authorizes aggrieved employees, who have suffered California Labor Code violations, to act as private attorneys general to recover civil penalties from their employers. The penalties awarded to the state are shared with individual plaintiffs. Seventy-five percent goes to the state to be used to improve Labor Code compliance and twenty-five percent goes to the plaintiffs.
PAGA applies to most California employment law violations including:

• minimum wage violations;
• unpaid overtime;
• missed meal and rest breaks;
• worker misclassification schemes;
• unreimbursed business expenses;
• undercounting hours; and
• violations of California occupational safety and health laws.

PAGA assesses steep penalties. The penalty for the initial violation is $100 per aggrieved employee per pay period for each initial violation and $200 for each subsequent violation per aggrieved employee per pay period. When a lawsuit alleges a long-standing practice affecting many employees, as Turley did, simple math can yield a really big number.

Many employers who face PAGA lawsuits change their practices to avoid penalties in the future. Worker advocates speculate that, without PAGA, employment law violations in California would be much higher. There is also plenty of pushback. Employer advocates have dubbed PAGA the “bounty hunter law.”

There is also plenty of criticism that PAGA delegates important law enforcement functions to those who are least able to carry the burden. The average starting hourly wage for a Chipotle Mexican Grill crew member in California is approximately $14.55. For comparison, the Attorney General of California, Xavier Becerra, makes $158,775 annually. READ MORE CALIFORNIA LABOR LAW LEGAL NEWS Walgreens Settles Call Center Workers' Unpaid OT Suit Apple Faces Unequal Pay Lawsuit Masuda v. Serve Robotics, Inc.: A New Front in the Gig Economy Wage Battle More CALIFORNIA LABOR LAW News Plaintiffs’ attorneys made money, too, of course. Under the October 2 settlement, they have agreed to take a reduced fee of $612,500 for five years of work to cover costs and ultimately divided among an unnamed number of lawyers. How satisfying is half a loaf? It depends, of course, on how hungry you are. Plaintiffs’ said of the June proposal, “"This is about the best settlement you can get." At the time, Chipotle’s attorney may have spoken the truth for both sides when he acknowledged that "It could be an ugly trial, unfortunately." The greatest part of the benefit for hourly workers like Tanika Turley lies in the speculative hope that PAGA will produce greater voluntary employer compliance with California labor law mandates.