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Chipotle stock tumbles after New York City sues the restaurant chain, alleging labor law violations

Key Points
  • New York City Mayor Bill de Blasio's administration is suing Chipotle Mexican Grill, alleging violations of the city's Fair Workweek Law.
  • More than 30 employees from five different Brooklyn locations of Chipotle filed complaints with the Department of Consumer and Worker Protection.
  • The department is seeking at least $1 million in restitution for workers plus civil penalties and future compliance with the requirements of the law.
A employee sprinkles cheese on a burrito at a Chipotle Mexican Grill restaurant in Hollywood, California.
Patrick T. Fallon | Bloomberg | Getty Images

New York City Mayor Bill de Blasio's administration is suing Chipotle Mexican Grill, alleging it violated a city labor law that requires predictable schedules for fast-food workers.

Shares of Chipotle, which were down 4% prior to the announcement, tumbled further. The stock is trading down 5.7% Tuesday afternoon.

The lawsuit alleges that Chipotle violated New York City's Fair Workweek Law, which went into effect in November 2017. More than 30 employees from five different Brooklyn locations of Chipotle filed complaints with the Department of Consumer and Worker Protection.

They allege that Chipotle failed to give estimates of work schedules and schedules two weeks in advance. The company also allegedly did not get consent for last-minute schedule changes or asking employees to close the store one day and open the following day. The lawsuit also alleges that Chipotle did not give pay premiums for those schedule changes or for working "clopenings," as they are known in the retail business.

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The DCWP also said that Chipotle had an illegal sick leave policy. The lawsuit alleges that Chipotle also violated New York City's Earned Safe and Sick Time Act, which requires that employers give workers a minimum amount of time off from work when they need to use sick time for themselves or a family member.

The department said that interviews with employees showed that Chipotle's paid sick leave policy was "inconsistent" and "confusing." Employees also had to find a replacement for their shifts if they wanted to take sick time, according to the complaint.

The department is seeking at least $1 million in restitution for workers plus civil penalties and future compliance with the requirements of the Fair Workweek Law. The city is also launching an investigation into allegations of similar violations at 11 Chipotle locations in Manhattan.

"With respect to the Fair Workweek Law, Chipotle has been working cooperatively with the city to ensure we have systems and processes in place to comply with the law, so we believe the filing of charges was unnecessary," Laurie Schalow, Chipotle's chief reputation officer, said in a statement. "Regardless, we will continue to cooperate with the city and we are addressing any prior noncompliance concerns."

De Blasio is currently trying to win the Democratic nomination for the 2020 election but has said that he will drop out of the race if he does not qualify for the October debate. While on the campaign trail, he has aligned himself with issues relating to workers' rights and labor unions. For example, he vowed to boycott McDonald's until the company pays its workers $15 per hour.