Sued for Wage Theft: More Headaches for Chipotle (CMG)

Just when you thought Chipotle Mexican Grill Inc (CMG) might be getting back on track, a politician calls for an investigation into allegations of wage theft by the restaurant.

Rosa DeLauro, a Democratic representative from Connecticut, is trying to convince the U.S. Labor Department to investigate Chipotle after a class-action lawsuit was filed in Colorado. The lawsuit claims Chipotle routinely underpaid its employees and denied them overtime pay. (See also: Rise and Fall of a Wall Street Darling: Chipotle.)

The allegations claim that Chipotle’s managers were encouraged to keep employee costs down in order to maximize bonuses up the chain. Chipotle’s employees typically earn more than workers in similar positions at competing fast food restaurants. Employees claim the biggest issue with their wages stems from Chipotle’s closing time procedures. They say that the time clock would automatically punch out workers at midnight or 12:30 am but that managers would force the workers to stay in order to clean up or to prep for the following morning. Other employees claim they were forced to attend mandatory meetings off the clock.

Things were looking up for Chipotle last week. Activist investor Bill Ackman announced a large position in the restaurant and the company settled a lawsuit with food poisoning victims. However, today’s news dropped the stock back to a price last seen in late August—before the settlement and before Bill Ackman. (See also: Ackman’s Pershing Square Bets on Chipotle.)

Chipotle’s next earnings are highly anticipated as the company has been working to regain customer’s trust and has instituted a temporary loyalty program to entice customers to visit daily. With that program coming to an end and seemingly weekly bad news for Chipotle, investors should be wary of this expensive stock.

The Bottom Line

Just as things were starting to go back to normal, a call for an investigation into employee allegations of wage theft is announced. Shares were down approximately 2% in by mid-morning.

Source: www.investopedia.com www.investopedia.com

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