The Obama NLRB, National Security & Family Haircuts

On July 20, 2015, in CNLP Cases, NLRB, Public Policy, Recent CNLP cases, by Jacob Hitt

The RoySpa Case Against Abusive Law Suits on Small Businesses “…this is two little people up against a national union—a huge union—the Teamsters in fact, and the federal government coming after you, telling you that they have rights over everything you own. (Over) cutting a woman’s hair!” –Joyce Cayli, RoySpa owner Introduction to RoySpa LLC case […]

The RoySpa Case Against Abusive Law Suits on Small Businesses

“…this is two little people up against a national union—a huge union—the Teamsters in fact, and the federal government coming after you, telling you that they have rights over everything you own. (Over) cutting a woman’s hair!”

–Joyce Cayli, RoySpa owner

Introduction to RoySpa LLC case by NLRB Target Joyce Cayli:

On Tuesday afternoon, July 12, 2011, Joyce Cayli and her husband joyfully learned that they had been awarded a family haircutting contract on a military base in Great Falls, Montana. The Malstrom Air Force Base presented the couple with an opportunity to strive for the American Dream: the successful entrepreneur.

Teamsters’ bosses and the National Labor Relations Board (NLRB) had other plans. They turned the dream into a nightmare in less than two years. By November 2012, the Caylis were facing numerous charges stemming from Teamsters’ union official, Max Hallfrisch’s, complaints to the NLRB. The NLRB General Counsel supported Hallfrisch’s complaints with the preposterous notion, among others, that national security depended on the Caylis’ family hair salon.

The Caylis’ salon, known as RoySpa, Inc., now had the vice of the NLRB, acting on behalf of the Teamsters, clamping down on them. The spurious charges were based on the failure of the Caylis to maintain a union collective bargaining agreement (CBA) that RoySpa neither endorsed nor negotiated.

During the months leading up to the charges, Joyce received numerous calls during the day from Hallfrisch attempting to trick her into negotiations or threaten her with financial ruin. On February 20, 2013, the NLRB forced the family from Centreville, Virginia to defend themselves in Great Falls, Montana, which threatened them with financial ruin.

Prior to the trial date, Mike Avakian with the Center on National Labor Policy, Inc. (CNLP) entered the fray. The CNLP stopped Joyce’s Teamster harassment and defeated the Hallfrisch’s charges. With little time to spare, CNLP was able to help preserve the Caylis’ dream and defeat this Teamster union’s tactic.

Without the CNLP’s skills and resources, RoySpa might have become just another failed business at the hands of governmental overreach. Unfortunately, lawsuits against small businesses like RoySpa are far from rare. Big Labor and Big Government commonly prey on small businesses. It is well known that union bosses and government officials rely on small businesses lack of resources to defend themselves against the seemingly endless charges government agencies and unions can file.

Small businesses depend on organizations like CNLP to throw them their only lifeline in a sea of predatory legal suits like those pressed against RoySpa. This is their story.

Background:

RoySpa’s owners bid on a concessionaire contract to provide hair and cosmetology services to the Malstrom Air force base in Montana knowing they were taking a spot left open by the closure of a barbershop, “The Old Fashioned Barber.” For Joyce Cayli, a well-known cosmetologist and teacher with almost 20 years in the field, this seemed like a sound investment of her skills.

Before placing her contract bid, Joyce discovered the previous barbershop held a union contract. She was assured by the Army & Air Force Exchange (AAFES) that no union contract was in place that RoySpa had to recognize. Based on this understanding, the Caylis accepted a five-year contract on the Malstrom base starting in September of 2011.

As part of their contract, it was guaranteed that RoySpa would operate in a brand new facility on the base. However, the building was still under construction when their contract started. In the interim the Caylis were asked by AAFES to manage the former barbershop’s space and remaining seven to eight employees. Full haircare services (coloring, perms, etc.) were not provided.

RoySpa’s contract stipulated that full cosmetology services would begin during facility switchover. Upon changeover, RoySpa needed nine cosmetologists to staff the salon. Only three of the barbershop’s workers had become qualified as cosmetologists to switch over when the new facility was completed.

Having abided by all the agreements set out in the AAFES contract, it came as a surprise to the Caylis when they received communications from Teamsters Local 2. The Union demanded that the Caylis abide by the contractual obligations in the barbershop CBA drawn two months before the barbershop terminated business.

This contract that Hallfrisch attempted to bind them to, was signed by the barbershop knowing it extended nine months beyond its last day of operation. Included in that CBA was the striking stipulation that whoever “comes in behind this person and assumes this contract, they are the successor,” –with the intent that the next haircare service (RoySpa) would have to assume the CBA.[1]

For the next several months as RoySpa started its operation at Malstrom, it received multiple communications from the Union’s Business Manager complaining about the dress code changes and a failure to pay wages in the CBA. RoySpa enforced the AAFES directed dress code, extended service hours to meet its contract terms, and made wage alterations to align with its cosmetology services. The Caylis, politely, denied the Teamster’s efforts to dictate RoySpa’s employment policies.

Hallfrisch was persistent. He called daily to coerce Joyce to sign and abide by the old CBA. On June 18, 2012, the union pressed farther and filed a charge under the National Labor Relations Act (NLRA), against RoySpa with the NLRB. The charge asserted that RoySpa violated the barbership successor clause and was neither abiding by the CBA nor negotiating employee grievances with the Union. When RoySpa resisted, the NLRB filed a formal Complaint.

The Case:

Now being tried by the NLRB for this violation, the Caylis found themselves confronted with hostile federal government bureaucrats demanding compliance with their demands or closure. This was beyond the Caylis ability to fathom or defend. They searched for an attorney.

That search led them to only one possible labor law firm in Montana. Since they would have to travel over 2,000 miles to attend the hearing, they searched for counsel locally. The costs of counsel were staggering. But, they found the Center on National Labor Policy, Inc. (CNLP), a non-profit legal foundation, to assist them.

Their one path to refuge from the NLRB’s union inspired complaint initially rested in the technicalities of the NLRA for small businesses—especially those operating within military compounds. CNLP counsel, Mr. Avakian, on behalf of RoySpa, fought the assertion that the NLRB had any authority to prosecute them under its jurisdiction.

The NLRB’s General Counsel relied on three arguments in its prosecution of the Caylis. One argument was the business generated more than $500,000 worth of revenue, a jurisdictional requirement imposed by Congress. RoySpa made less. The threshold was not met.

The second argument was that RoySpa had made interstate sales of $5,000 or more. Though the owners owned other salons, their interstate sales were not over $5,000. The threshold was not met.

Lastly and most absurdly, the NLRB charged RoySpa under the “National Defense Standard.” This standard gives the NLRB jurisdiction and cause to mitigate labor disputes in favor of collective bargaining if a labor strike on a military facility would disrupt national security. The CNLP countered that the hair salon provided haircare services aimed primarily at families of servicemen and local residents. Its function had little to do with defending national security.

The salon also existed in a market with approximately 30 other competing salons within a few miles of the base. The haircuts they provided were directed by customer preference so there were no ties to military regulation dress code. Unsurprisingly, the national defense infringement threshold was not met.

The charge that RoySpa was a successor of the barbershop was also proven to be unfounded. The CNLP proved that the AAFES required licensed cosmetologists-not-barbers to operate the salon, and its staff composition was dissimilar to that of the barbershop. These facts invalidated the NLRB’s assumption of successorship and supported RoySpa’s rejection of the union’s claim to the CBA. The judge and the Board itself agreed.

Despite successfully disputing the charge, they were still injured. The Caylis now faced excessive damages due to the lawsuit. As a two-person team, with no back up staff, they took on a great burden to prepare and be present at the hearing of their case. Airfare tickets to Montana alone were approximately $1,200 each, plus lodging and food.

During the procession of the charge phase, hearing, briefing, and decision-making, the Caylis were subjected to great emotional stress, loss of work hours (and business), and carrying the financial burden of defense until the CNLP entered to defend them against the oppressive and manipulative union charge. The case, being so abusive, accumulated the equivalent of about $55,000 in attorney fees.[2] For any small business that should suffer through an appellate review, that rate would push upward of $100,000 at minimum.

Larger Implications of The Case:

The purpose of outlining a case like RoySpa is not just to show the often-problematic relationship between unions and employers. A large part of why RoySpa could escape the Union’s erroneous claims was because they did not reach thresholds in place that granted the NLRB jurisdiction. These thresholds for small business protection, however, are grossly inadequate and leave many small businesses prey to abusive claims.

For instance, in cases pressed by the NLRB, the respondent (the employer being charged) does not have equal discovery rights as the Board’s General Counsel. The civil procedure of the NLRB only provides itself the right to discovery – to know all exhibits and evidence before the case is heard[3][4]. The defending small business has zero right to this evidence until the first day of trial- a “trial by ambush.” The employer enters a case blind and severely handicapped.

The NLRB is further governed by jurisdiction parameters. These include minimum limits on total revenues for retail and nonretail services, and interstate sales volume. The problem with these parameters is that they come from a discretionary rubric drawn in 1959[5]. The values have since been corroded by inflation so that with each given year the board’s jurisdiction over smaller and smaller businesses increases. In 2015 that $500,000 threshold should be over $4,000,000 if adjusted for inflation[6].

President Obama’s recent announcement to raise the threshold for overtime compensation for salaried workers[7] makes this an opportune time to address outdated regulation thresholds. Many jurisdictional thresholds were established for small businesses, low-income workers, and individual employee rights in an era that stands 50 years or more in the past. The original intent of these regulations has been lost over time: to protect small businesses from prosecution without adequate resources to defend themselves and to exempt activities having minimal impact on interstate commerce. These policies have been corroded by unequal policy, misguided legal precedent, and decades of inflation.

Yet, there has not been a time more desperately in need of these extra safety valves against blatant abuse. With RoySpa, the NLRB knew these thresholds were not met before the first hearing even began. Instead of dismissing the case in the light of overwhelming truth they did not have jurisdiction, they demanded that the Caylis come to their defense anyway. The NLRB’s purpose was to impose its will knowing the Caylis had little capacity to defend. The NLRB and Teamster’s extortionist intent was abundantly clear to Joyce Cayli:

“I think they were trying to set precedence on being able to come in and go after us no matter what—even us, a small business, that it didn’t matter what the rules were or what the regulations were. I mean if I fell into that small business category—that’s where I fell, period. It didn’t matter. They were going to find another way to get me…and, and they thought they could because financially I believe they thought they could win because I didn’t have the money to fight them,” (17:16)[8].

The NLRB often subjects small businesses with coercive pressure hoping the case itself will be enough to pressure the business into a settlement with the union, or worse, incur a default judgment for failing to appear or properly defend. Defaulting on judgments means that, without having to prove the validity of any accusations from the union, they are accepted at face value, held against the small employer, and backpay damages are established.

The insult doesn’t stop there. The NLRB had strong precedent it had no jurisdiction to press a national defense standard claim. The case of the Pentagon Barber Shop[9], ruled that haircuts were not a component of national defense. This was based on an almost identical situation at the Pentagon in 1981. Still, the General Counsel pressed that a hair salon, on an Air Force base in Montana, could affect national defense in a way that one at the Pentagon could not. In every aspect this lawsuit was frivolous and an unjustified burden on the backs of the Caylis.

RoySpa is an exemplary case of why new protections are needed. For businesses and haircare salons in isolated locales like Montana, gross income barely falls beneath a jurisdictional limit to prevent abuse. For business submitted to this structural brutality, the legal debt can be insurmountable.

Small businesses, as the foundation of a competitive and healthy economy, are not those reaping mass profits. And for owners of small and/or starting businesses there is zero flexibility to pay for cases defending themselves against frivolous union and government harassment. The Caylis found shelter in the charity of CNLP, but their situation highlights an appalling truth in our current interpretation of labor law. Due process is no longer a right government labor agencies must provide citizens, but a fleeting gold ring on a carousal for those who can afford the ticket.

Joyce Cayli’s story, in her own words:

[1] RoySpa, LLC and International Brotherhood of Teamsters Local 2 19-CA-83329 (2012), See General Counsel: Exhibit 3.

[2] See www.nlrb.gov/case/19-CA-083329 for case documents including expense records and presented exhibits.

[3] Offshore Mariners United and International Transport Workers Federation and Trico Marine Operators, Inc.: Order Denying Petition to Revoke Subpoena. 15–CC–832 and 15–CC–833. 756, (2002).

[4] Country Skillet Poultry Company and Retail, Wholesale and Department Store Union, AFLCIO: Decision, Order, and Certification of Results of Election.10-CA-19395 and 10-RC-12778. 847 (1984).

[5] Holwill, Richard N. A Mandate for Leadership Report Agenda ’83. The Heritage Foundation, 240-242 (1983).

[6] Bureau of Labor Statistics Inflation Calculator

[7] Bernstein, Jared. President Obama raises the overtime salary threshold, reestablishing a key labor standard, The Washington Post. June 29, 2015.

[8] For full footage clip see https://www.youtube.com/watch?v=HPICjW-r9js&feature=youtu.be

[9] See Pentagon Barber Shop, Inc., 255 NLRB 1248 (1981).

 

This article was written and edited by Katelyn Nuckoles, Jacob Hitt, and the Center on National Labor Policy, Inc.

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