Hair Cuttery ordered to pay $4.2M in wages
Creative Hairdressers Inc., the parent company of Hair Cuttery, has been ordered to pay more than $4.2 million in back wages and benefits to employees who weren’t cut final paychecks just before salons closed because of the coronavirus outbreak.
The company closed its 750 salons on March 21, including several hundred in Florida, following government orders to shut down all nonessential businesses. In early April, the Wall Street Journal reported that Hair Cuttery executives expected to miss payroll, a signal of the deep impact the sudden closures wrought on businesses.
The U.S. Bankruptcy Court for the District of Maryland ordered the company to pay close to $1.15 million in back wages to more than 7,500 employees across 15 states, including employees at Florida salons, plus an additional $3.1 million in missed 401(k) contributions, bonuses and employmentrelated taxes. The ruling came after an investigation by the U.S. Department of Labor.
The company filed for Chapter 11 bankruptcy in mid-April, following weeks with salons closed and most hairdressers out of a job. Creative Hairdressers has agreed to sell most of its salon locations as part of a bankruptcy reorganization plan.
On Monday, when salons and barbershops in Florida were allowed to reopen, Hair Cuttery locations remained closed. Calls to an Orlando shop were met with a recording of the company’s president saying locations would open “as soon as we can.”
In financial filings, Creative Hairdressers executives blamed the coronavirus pandemic, which they said forced them to withhold millions of dollars in wages and benefits for hours worked the week before salons shut down.
The order from the Department of Labor also automatically halts pending lawsuits against the company, including one filed in New Jersey District Court in which employees claim they were told they “would not be paid at all for the hours they worked” and executives said they would make good on missed wages once the company received federal funding or when salons reopened.
A separate lawsuit filed in Florida’s U.S. Middle District Court alleges an additional 500 employees and “potentially hundreds more” were also entitled to unpaid wages.
Wage and Hour Division Administrator Cheryl Stanton said in a statement the company’s “violations were not found to be willful,” however. A report in Bloomberg Law said the company’s “intent is to fund all missed payroll.”