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Hair Cuttery Blames Missed Pay on Virus, Files for Bankruptcy

April 24, 2020, 6:26 PM

The owners of Hair Cuttery and other salon chains say the Covid-19 pandemic forced them to withhold more than $3 million in wages, bonuses, and benefits earned by its employees the week before its stores shut down, according to new bankruptcy filings.

Creative Hairdressers Inc. and Ratner Cos. sought court approval to pay all employees those wages and continue their benefits, in a motion accompanying the petition filed Thursday in the U.S. Bankruptcy Court for the District of Maryland.

The companies expect the court to grant the request, which would “pay all employees 100% of the missed back pay,” Joel I. Sher of Shapiro Sher, who represents Creative and Ratner, said Friday. A hearing is set for April 27, and “the intent is to fund all missed payroll the next day and get employees paid next week,” he said.

The bankruptcy filing will also automatically halt two proposed class actions brought by Hair Cuttery employees this month, which seek to recover earned but unpaid wages from the companies and multiple executives.

‘Resolved One Way or the Other’

“All those claims will be resolved one way or the other through the bankruptcy case now,” Robert W. Lannan of Lannan Legal PLLC, an attorney advising some Hair Cuttery employees in Washington, D.C, said Friday. Even if the plaintiffs do receive back pay, they could continue to pursue any claims for statutory damages and interest, he said.

The lawsuits could also proceed against any non-debtor individuals named as defendants, Lannan noted, because the stay against the companies won’t necessarily extend to them.

The bankruptcy filing comes after weeks of uncertainty about when, or if, the employees would get their paychecks for hours worked and commissions earned from March 15 to March 21, when the salons closed down.

The missed paychecks, which were due April 7, were “causing panic” and significant financial stress for many employees, Carlin Trujillo, a stylist at a BUBBLES Salon in Fredericksburg, Va., said Thursday. Several stylists had contacted the U.S. Department of Labor about the situation, she said.

Ratner and Creative told employees Thursday evening that the company can now pay those wages, subject to court approval, after being acquired by a Tacit Salon Holdings LLC affiliate, according to company messages obtained by Bloomberg Law.

‘Re-Engage’ Workers

One of the bankruptcy filings indicates that the Tacit Salon Holdings affiliate intends to retain the salons’ employees. The company “views the retention of the Debtors’ workforce as an essential element of the business it is seeking to acquire” and wouldn’t move forward with the acquisition “if it believed it could not re-engage these furloughed Employees.”

The upheaval has left many employees with uncertain feelings.

The companies’ employee communications have been “very restricted” and “heavily censored,” Courtney Holland, a Hair Cuttery salon professional in Waynesboro, Va., said Friday. “Like many others, I heard about it in the news first,” she said of the announcement.

“There is a lot up in the air right now and trust has been broken.”

The companies, which own Hair Cuttery, BUBBLES Salon, and other brands, employed more than 10,000 salon professionals in nearly 850 salons prior to the Covid-19 crisis.

The cases are Creative Hairdressers, Inc., Bankr. D. Md., No. 20-bk-14583, 4/23/20 and In re Ratner Cos., Bankr. D. Md., No. 20-bk-14584, 4/23/20.

To contact the reporter on this story: Kathleen Dailey at kdailey@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Nicholas Datlowe at ndatlowe@bloomberglaw.com