By Tina Irgang
The ill-fated chain restaurant, still reeling from lost sales after an E. coli outbreak, is facing a lawsuit from thousands of workers who allege that managers forced them to clock out but then continue working.
“Chipotle has faced similar lawsuits before, but this is the first time there has been such a large class action case against the company for wage theft,” reports CNN Money. “As of Friday, 9,961 current and former workers have sent in consent forms to join the lawsuit.” Current and former employees have signed on in almost every state Chipotle operates in.
“Chipotle has argued this is a few rogue managers who aren’t following policy. Our view, especially given the number of people opting in, is that it’s a systematic problem at Chipotle,” Kent Williams, an attorney representing the workers, told CNN Money.
“A lawsuit is nothing more than allegations and is proof of nothing,” Chipotle’s communications director has told Fortune. Chipotle has argued that it paid its employees all the wages they were due.
The lawsuit comes at a time when the chain is trying to bounce back from E. coli and norovirus outbreaks in multiple states. Chipotle has seen sales declines for three consecutive quarters, with the most recent one showing a 23.6-percent decrease in same-store sales, according to The Chicago Tribune. The company also has said that its profits are down 82 percent compared to last summer.
That’s not all: Chipotle’s other troubles
- In June, Chipotle was sued by shareholders who alleged insider trading by the company’s top executives, according to MarketWatch. “According to the lawsuit, executives, acting on inside information, sold tens of millions of dollars in shares in the months leading up to outbreaks of foodborne illness at multiple restaurants,” reports Colorado Public Radio. (Chipotle is based in Denver, and the suit was filed there.) In the wake of the outbreaks, stocks were down nearly 50 percent on their previous value. The Denver Post reports that shareholders are seeking compensation from Chipotle co-CEOs Steve Ells and Montgomery Moran, along with eight other executives named in the complaint.
- The Denver Post also reports that Chipotle is facing two other, separate shareholder suits related to the plunge in stock value.
- Earlier this month, a U.S. District Court jury in Washington, DC awarded $550,000 to a former Chipotle employee who said she was fired for being pregnant, according to The Washington Business Journal. The suit stated that the plaintiff’s manager, upon learning she was pregnant, had restricted her access to water and bathroom breaks, and refused permission for her to attend a pre-natal appointment. The employee was fired after she left to attend her appointment anyway.
Meanwhile, Chipotle has been trying to lure back customers spooked by the recent outbreaks. The chain “will offer two new promotions during the month of September, one for college students and another for families. That’s on top of the chain’s limited-time Chiptopia loyalty program, which dishes out free entrees after a set number of purchases,” reports CNBC.
But given the number and scope of Chipotle’s troubles, it’s unlikely some free burritos will turn things around.
Tina Irgang is the managing editor of SmartCEO magazine and SmartCEO.com. Contact her at firstname.lastname@example.org.