Chipotle is permanently on Santa’s naughty list. But Santa is a pretty nice guy and he still gives naughty companies what they ask for. In this case, Chipotle had a dream. See, they were routinely stealing wages from workers. But it feared the workers coming together for a big lawsuit. So it started forcing workers to sign mandatory arbitration agreements. Whoops!
A few years ago, the burrito chain Chipotle began requiring employees to sign mandatory arbitration agreements. The idea was to force the workers to give up their right to sue collectively over wage theft or workplace discrimination.
Chipotle’s plan seems to have worked out a little too well: The company is now facing a flood of arbitration cases from former employees determined to win the backpay they claim they are owed.
Facing potentially huge liabilities, Chipotle recently asked a federal judge to block the workers from seeking arbitration with lawyers who’d represented them in court ― despite the fact Chipotle had forced arbitration upon its workers via agreements they had to sign when they were hired.
The judge denied that request, calling Chipotle’s actions “unseemly.”
“This is their worst-case scenario, apparently ― and the scenario they asked for,” said Kent Williams, one of the attorneys representing the former Chipotle employees.
The Supreme Court had legalized this sort of thing, thinking that it was going to help employers deal with their pesky workers, the ultimate goal of the Roberts Court. But it turns out that 150 workers decided to file for individual arbitration anyway, even though it’s a big pain.
Unlike a collective- or class-action lawsuit, all of those claims would be administered separately, and they could get very expensive for Chipotle. A single case can run tens of thousands of dollars in lawyers fees and payments to the arbitrator service ― in this case, JAMS. The cost of litigating can dwarf the actual damages.
“If you start running the numbers on this thing, arbitration costs could top $30,000 or $50,000 [each],” said Williams. If hundreds or thousands of workers pursue cases, “You get up to, like, tens if not hundreds of millions of dollars very quickly, just in arbitration expenses.”
Under the arbitration rules, Williams said, the cases would be heard in the county where Chipotle last employed the worker in question, meaning the claims would be spread out all over the country. Chipotle has roughly 2,400 locations, according to its latest SEC filings. If so many cases were to move forward, they would present a logistical nightmare for the company.
Williams said Chipotle has so far refused to pay its share of the arbitration filing fee, which amounts to $1,100 per case, preventing those cases from proceeding. A similar situation has been unfolding for Uber drivers who also signed arbitration agreements. As Gizmodo reported earlier this month, some 12,000 drivers are pursuing arbitration with the ride-sharing giant. Like Chipotle, Uber has not paid the filing fees required in those cases.
Contempt for the courts when they don’t go along with your position goes real well with your contempt for workers.
But Chipotle’s court filings say plenty. The company wasn’t satisfied with getting nearly 3,000 mostly low-wage workers booted from a large lawsuit. It asked Kane, the judge, to forbid those workers from pursuing arbitration with Williams and his team as their attorneys. Their rationale: Because the workers had signed arbitration agreements, they never should have received notice about the collective-action lawsuit and become clients of Williams and his colleagues.
Kane rejected that argument, essentially saying that whatever happens in arbitration isn’t his court’s business. But once the arbitration filings started coming in, Chipotle appealed. “The arbitrations are going forward,” the company bemoaned in its filing, “causing immediate harm to Chipotle.”
The judge ruled against Chipotle yet again, and leveled a withering critique of the company’s legal strategy: “Chipotle’s attempts to delay and obfuscate the claims of the Arbitration Plaintiffs in both the courts and in arbitration (the forum to which it required these employees to submit) are unseemly.”
Also, Chipotle is pretty bad and is only worth eating at if there as a desperation choice. About once a year I end up at one and remember this for the next 11 1/2 months or so.