Spa Corporate Officials Taken into Custody for Refusal to Comply with NLRB and Court Orders

October 10, 2023

In a recent and highly unusual turn of events, the United States Court of Appeals for the Seventh Circuit (Seventh Circuit) has ordered U.S. Marshals to take corporate officials of Haven Salon + Spa (Haven) into custody for their steadfast refusal to comply with orders issued by the National Labor Relations Board (NLRB) and the Seventh Circuit itself. This case underscores the significant legal consequences of noncompliance with NLRB directives and offers critical lessons for employers facing labor disputes. It also sheds light on the pivotal role attorneys play in such high-stakes situations.

Facts of the Case

The case revolves around Haven, a chain of upscale beauty and wellness establishments operating in multiple states. During the height of the pandemic, Haven discharged an employee for raising concerns about the adequacy of the company’s COVID-19 safety protocols. The NLRB found the employee had engaged in protected concerted activity within the meaning of the National Labor Relations Act (the Act) and that Haven had thereby violated the Act. The NLRB ordered Haven to offer the employee reinstatement, expunge references to the discharge from its files, provide records relevant to calculating backpay to the NLRB, post a notice of employee rights at its facility, and file a certificate of compliance with its regional NLRB office. The Seventh Circuit later enforced the NLRB’s order.

After failing to fully comply with the court-enforced order in February 2023, Haven was held in contempt by the Seventh Circuit. Despite daily fines being imposed on Haven to enforce compliance, Haven still did not comply. The Seventh Circuit then granted the NLRB’s Motion to liquidate the fines, add the two corporate officials of Haven as additional respondents in contempt, and to issue a writ of body attachment. Haven was ordered to pay the NLRB over $30,000 in fines and attorney’s fees. The U.S. Marshals then took the two corporate officials into custody on September 12th for a same-day hearing where they committed to promptly complying with the Seventh Circuit’s orders before a magistrate judge.

Legal Implications of Noncompliance with NLRB Orders

The NLRB is tasked with safeguarding employees’ rights to organize and engage in collective bargaining, among other responsibilities. When employers violate these rights or engage in unfair labor practices, as Haven did, the NLRB can issue orders to remedy the situation. When the NLRB issues an order, it is legally binding and must be followed by both employers and employees. Consequences can include:

  • Civil Contempt of Court: In the case of Haven, their refusal to abide by NLRB directives resulted in the court finding them in civil contempt. Civil contempt of court occurs when an individual or entity willfully disobeys a court order. The consequences of civil contempt can be severe, ranging from fines and sanctions to, as in this case, incarceration of responsible corporate officials.
  • Potential Criminal Charges: In some cases, persistent noncompliance with NLRB orders can lead to criminal charges. While criminal charges are relatively rare, they can be brought against individuals who engage in unfair labor practices, such as intimidating employees who seek to unionize.
  • Liability for Backpay and Reinstatement: Failure to comply with NLRB orders can also result in significant financial liabilities. Employers may be required to pay back wages and reinstate employees who were wrongfully terminated or otherwise harmed due to labor violations.
  • Damage to Reputation: Beyond the legal consequences, noncompliance with NLRB orders can severely damage a company’s reputation. Negative publicity can deter customers and potential employees, and may lead to long-term financial repercussions.

Lessons for Employers

The Haven case serves as a stark reminder to employers about the importance of adhering to labor laws and respecting the rights of their employees. Here are some key lessons that employers can take away from this case:

  • Compliance is Non-Negotiable: Employers must recognize that compliance with NLRB orders is not optional. Ignoring orders or hoping they will disappear can lead to legal trouble.
  • Prioritize Employee Welfare: Ensuring a healthy and fair work environment is not only a legal obligation but also a moral one. Companies that prioritize the well-being of their employees tend to have higher retention rates, better productivity, and a stronger reputation.
  • Engage in Dialogue: It is in the best interest of employers to engage in constructive dialogue with employees and labor unions to address concerns and avoid legal disputes. Proactive communication can often prevent conflicts from escalating to the level seen in the Haven case.
  • Seek Legal Counsel Early: When facing NLRB investigations or orders, employers should promptly consult with experienced labor law attorneys who can provide guidance on compliance and help navigate the legal process effectively.
  • Public Relations: Maintain a positive public image. Reputation management can play a significant role in the outcome of labor disputes. Employers should be mindful of the potential impact on their brand and act accordingly.

Role of Attorney in These Situations

Attorneys play a critical role in navigating labor disputes and ensuring compliance with NLRB orders. Here are the key functions attorneys serve:

  • Legal Compliance: Attorneys can advise employers on how to comply with NLRB orders and navigate the legal process to rectify any violations. They can provide insights into the specific requirements of the orders and help develop strategies to meet them.
  • Negotiation and Mediation: Attorneys can engage in negotiations or mediation on behalf of their clients to resolve labor disputes amicably. This can help avoid the need for costly and protracted legal battles.
  • Litigation Defense: In cases where litigation is unavoidable, attorneys are essential for providing a robust defense. They can represent their clients in court, argue legal points, and work toward achieving the best possible outcome.
  • Preventative Measures: Attorneys can also assist employers in implementing proactive measures to prevent labor disputes in the first place. This includes drafting employee handbooks, policies, and procedures that align with labor laws and best practices.

The Haven case serves as a stark reminder of the legal and reputational consequences that can arise from noncompliance with NLRB orders. Employers must take labor disputes seriously, seek legal counsel when necessary, and prioritize compliance to maintain both their legal standing and their reputation in the eyes of the public.

For additional information regarding the content of this article, please contact KJK Labor & Employment attorneys Rob Gilmore (RSG@kjk.com; 216.736.7240) or Emily Vaisa (EOV@kjk.com; 216.736.7257).