Roy Spa, LLC

National Labor Relations Board - Administrative Judge Opinions

Jul 12, 2016

19-CA-083329 (N.L.R.B. Jul. 12, 2016)

JD–66–16
Great Falls, MT
UNITED STATES OF AMERICA
BEFORE THE NATIONAL LABOR RELATIONS BOARD
DIVISION OF JUDGES
ROY SPA, LLC
and Case 19–CA–083329
INTERNATIONAL BROTHERHOOD
OF TEAMSTERS, LOCAL 2
Ryan Connolly, Esq.,
for the General Counsel.
Michael Avakian, Esq.,
for the Respondent.
Timothy McKittrick, Esq.,
for the Charging Party.
SUPPLEMENTAL DECISION AND ORDER
[Equal Access to Justice Act]
ROBERT A. GIANNASI, Administrative Law Judge. This case deals with an Equal
Access to Justice (EAJA) application filed by Respondent after the dismissal of an unfair labor
practice complaint against it. The case comes to me on remand from the Board to make a
determination whether the General Counsel had “substantial justification” to issue and litigate
the underlying complaint, which alleged that Respondent, as a successor employer, made
unilateral changes in the terms and conditions of employment of union-represented employees,
in violation of Section 8(a)(5) and (1) of the Act. See 363 NLRB No. 183 (2016).1 After the
remand, at the direction of the Board, the General Counsel filed an answer to the Respondent’s
application for fees and the Respondent filed a reply, in accordance with Sections 102.150-153
of the Board’s Rules and Regulations. The issue whether the substantive allegations in the
complaint were substantially justified is thus joined for my determination.

1 In its decision, the Board ruled that the General Counsel was substantially justified in asserting
jurisdiction over the Respondent, despite the administrative law judge’s dismissal of the complaint on the
ground that there was no jurisdiction over the Respondent. The remand was based on the judge’s failure
to consider whether the remainder of the case—the substantive complaint allegations—was substantially
justified. The remand came to me because Judge Michael Marcionese, who handled the underlying
proceeding and issued the initial EAJA ruling, retired and thus was unavailable to handle the remand.
JD–66–16
2
The Underlying Decision
On June 28, 2013, after a two-day hearing, Judge Michael Marcionese issued his decision
dismissing the General Counsel’s complaint alleging that Respondent, as a successor employer
obligated to bargain with the Charging Party Union (hereafter, the Union), made unilateral 5
changes to the commission rates of employees and unilaterally enforced a previously dormant
employee dress code, in violation of Section 8(a)(5) and (1) of the Act. Most of the decision
dealt with whether the Board had jurisdiction over Respondent’s operations—a question the
judge decided in the negative, thus resulting in a dismissal of the complaint on that ground. The
judge nevertheless briefly discussed the substantive allegations of the complaint, ultimately 10
stating that he “need not determine whether [the Respondent’s conduct] violated the Act because
the Board does not have jurisdiction in this matter.”
The judge’s decision sets forth the following facts and discussion relevant to the
substantive allegations of the complaint:15
The Respondent is a Virginia limited liability corporation
headquartered in Centreville, Virginia, that operates barber shops or hair care
facilities at several military bases in the United States, including the one at
Malmstrom Air Force Base in Montana, which is involved in this proceeding. 20
Joyce Cayli and her husband, Hasan Cayli, are members, i.e., owners of the
LLC and admitted agents of the Respondent. On July 12, 2011,2 the
Respondent was awarded thecontract to provide hair care services at
Malmstrom by Army and Air Force Exchange Services (AAFES), a private
nonprofit entity that runs base exchanges for the Department of Defense.325
The previous operator, the Old Fashioned Barber, had notified AAFES in June
that it wanted to terminate its contract because the barber shop at Malmstrom
was not profitable. The Respondent commenced operations at Malmstrom on
September 1 under a 5-year contract.
30
* * * *
. . . . The Respondent’s facility at Malmstrom is located within the designated
security area of the base with limited access to the general public. When
Respondent began operations, and for the first 10 months at least, the 35
overwhelming majority of its customers were male members of the military
seeking what is commonly referred to as a “regulation” or “military” haircut.
Beginning in July 2012, when the Respondent moved its shop to a new base
exchange building, it was transformed from a barber shop to a “family hair
care salon” with the goal of expanding its customer base to include more 40
women. This change was specifically required by the Respondent’s contract
with AAFES. In order to facilitate this change, the contract also required for

2 All dates are in 2011, unless otherwise indicated.
3 The base exchanges are classified as “non-appropriated fund activities,” meaning that no taxpaper
dollars are used. AAFES is essentially self-funded, using the revenue from services provided and
products sold at the exchange to fund the operation.
JD–66–16
3
the first time that all of the Respondent’s employees at Malmstrom have a
cosmetology license. Such a license is broader than the barber’s license that
several of the predecessor’s employees held and allows the licensee to work
with chemicals, e.g., for hair coloring and permanents. These are services that
are not typically performed for male members of the military. 5
The record evidence also shows that, while located on a secure military
base, the general public does have limited access to the Respondent’s facility.
A visitor to the base must show identification, and be subject to search at the
gate. There is a museum located on the base that the public is invited to visit 10
and school groups often tour the base. The record does not show whether the
Respondent has ever provided services to any member of the general public.
It appears that the Respondent’s customer base is still limited to members of
the military, their dependents, contractors working on base and retired
military who live in the area. Census records show that approximately 3500 15
people live on the base, approximately 56 percent of whom are male.
The evidence also shows that, while the Respondent operates the only
hair care facility, or barber shop, on base, there are a number of barber shops
and salons in the Great Falls vicinity, including one, the Eastside Barber 20
Shop, located just outside one of the gates. It is undisputed that a haircut at
the Eastside Barber Shop costs about $1 less than one at the Respondent’s
onbase facility. While it may be more convenient for base residents to get a
haircut at the Respondent’s facility on base, nothing precludes a service
member or other potential on base customer from utilizing these other 25
businesses off base.
* * * *
. . . . As previously noted, the previous contractor operating the barber shop 30
at Malmstrom was the Old Fashioned Barber. The Union had a collective-
bargaining agreement with that employer which expired on May 5, 2010. On
June 30, 2011, after the Union had received notice from AAFES that the Old
Fashioned Barber had terminated its contract to operate the shop, effective
August 31, 2011, the Union executed a new collective-bargaining agreement 35
for the term May 6, 2011, through May 5, 2013. The Union did not provide
AAFES with a copy of this new agreement until July 7, 2011, after the bid
solicitation period for a new contractor to take over the operation had closed.
The bid solicitation and the bid submitted by the Respondent were based on
there being no collective-bargaining agreement in place.40
There is no dispute that the Union’s business representative, Max
Hallfrisch, and Cayli, the Respondent’s owner and agent, had several
communications, written and oral from August 2011, through November
2011, in which Hallfrisch attempted to have the Respondent adopt the 45
collective bargaining it had negotiated with the Old Fashioned Barber. It is
clear that the Respondent never agreed. While these communications were
JD–66–16
4
cordial, and included discussion of several work issues, the Respondent never
agreed to recognize the Union as the 9(a) representative of its employees at
Malmstrom.
The record evidence also shows that, when the Respondent took over 5
the barber shop at Malmstrom, it retained all of the employees previously
employed by the Old Fashioned Barber, 4 continued to operate the business
at the same location serving the same customers, utilizing the same
equipment, without any hiatus. However, the record also shows that in July
2012, as envisioned by its contract with AAFES, the Respondent moved to a 10
new location, changed the type of services performed from a barber shop to
a full service salon, and change[d] the customer base to increase the number
of women for whom it provided hairstyling services. The employee
complement also changed between September and July 2012. By the time of
the conversion, only three unit employees remained. The other two, who did 15
not have cosmetology licenses, left their employment. The Respondent
increased its complement to nine employees, all with cosmetology licenses.
In addition, pursuant to the terms of its contract with AAFES, the
Respondent changed its hours of operation when it moved to the new
location. The Respondent was now open 7 days a week, including Sundays, 20
a day that it had previously been closed.
While the evidence would suggest a general refusal to recognize and
bargain with the Union, the complaint only alleges a refusal to bargain
regarding two discrete subjects, i.e., the change in commission rate and the 25
adoption of a dress code.5 This may very well be due to the fact that any
such general refusal to recognize and bargain occurred more than 6 months
before the Union filed its charge on June 18, 2012. In any event, the
evidence does show that the Respondent did not notify the Union in advance
before it changed the commission rate and began to enforce the existing 30
dress code. I need not determine whether this conduct violated the Act
because the Board does not have jurisdiction in this matter.
The EAJA Application
35
No exceptions were filed to Judge Marcionese’s decision so it became the final decision
of the Board. Respondent thereafter filed an EAJA application to recover its litigation fees. The
General Counsel filed a motion to dismiss and the matter was referred to Judge Marcionese, who
denied the application solely on the jurisdictional issue. As indicated above, that denial was
upheld by the Board, which remanded for findings on the substantive allegations; the General 40
Counsel thereafter filed an answer to the EAJA application and the Respondent filed a reply.

4 [fn. 5 in original] There were five unit employees and two supervisors working in the Malmstrom
barber shop on September 1 who all previously worked for the Old Fashioned Barber.
5 [fn. 6 in original] While alleged as a change, the record indicates that AAFES always had a dress
code for its concessionaire’s employees. The dress code may not have been enforced when the Old
Fashioned Barber had the concession.
JD–66–16
5
The Applicable Law
“EAJA entitles a prevailing party in an agency adversary adjudication to an award of
attorney fees unless the agency’s position was ‘substantially justified . . . on the basis of the 5
administrative record, as a whole . . . .’” Glesby Wholesale, Inc., 340 NLRB 1059, 1060 (2003).
Allegations are “substantially justified” when “the evidence is ‘what a reasonable mind might
accept as adequate to support a conclusion’—i.e., where ‘reasonable people could differ’ on
whether the allegation should be litigated.’” Glesby Wholesale, cited above, 340 NLRB at 1060,
quoting Pierce v. Underwood, 487 U.S. 552 (1987) and citing other authorities. “This standard 10
is not as demanding as ‘justified to a high degree’ or ‘substantial probability of prevailing.’”
Ibid, again quoting and citing authorities. As the Supreme Court has made clear, an agency’s
position can be justified “even if it is not correct . . . if a reasonable person could think it correct,
that is, if it has a reasonable basis in law and fact.” Pierce v. Underwood, cited above, 487 U.S.
at 566 fn. 2.15
I turn now to the applicable law concerning the substantive allegations of the
complaint—that Respondent was a successor employer required to bargain with the incumbent
union that represented the employees of the predecessor and that it thereafter made unlawful
unilateral changes by changing the employee commission rate and enforcing a dress code rule. It 20
is clear that an employer who has a bargaining obligation may not make unilateral changes in the
terms and conditions of employment of employees represented by a union—mandatory subjects
of bargaining—without first providing their bargaining representative notice and an opportunity
to bargain over the changes. NLRB v. Katz, 369 U.S. 736 (1962). An employer who takes over
the operations of a predecessor employer whose employees are represented by a union is deemed 25
a successor to the bargaining obligation of the predecessor if there is a “substantial continuity” in
the employing enterprise. The focus of that inquiry is whether, from the perspective of the
employees, their jobs changed or remained “essentially the same.” Important factors in the
inquiry—which is a factual one—include whether a majority of the predecessor’s employees
have been retained by the successor doing the same jobs under the same supervisors; and 30
whether the business of both entities is the same, with the same customers. Fall River Dyeing &
Finishing Corp. v. NLRB, 482 U.S. 27, 41-44 (1987). See also Cadillac Asphalt Paving Co., 349
NLRB 6, 9 (2007). Such a bargaining obligation is based on presumptions of majority status that
attach to an existing bargaining agreement or relationship between the predecessor and the
incumbent union. Fall River, 482 U.S. at 37-40. One such presumption is based on voluntary 35
recognition and the existence of a bargaining agreement (Auciello Iron Works, Inc. v. NLRB, 517
U.S. 781, 786-787 (1996)), which may only be rebutted by a showing of loss of majority in fact.
Levitz Furniture Co., 333 NLRB 717 (2001).6
It is also well established that a successorship bargaining obligation is measured “at the 40
time the bargaining obligation attaches.” Thus, changes that occur later are “irrelevant” to the
determination of successorship status. Cadillac Asphalt, cited above, 349 NLRB at 9.

6 In Fall River, cited above, the Supreme Court made it clear that the successor is not bound to apply
the terms of the predecessor’s bargaining agreement and may set initial terms on which it will hire the
predecessor’s employees. Nor is it under any obligation to hire the predecessor’s employees, although it
must not discriminate against union employees in its hiring. 482 U.S. at 41.
JD–66–16
6
The General Counsel was Substantially Justified
As Judge Marcionese stated in his original decision, the facts on the substantive
complaint issues are not in dispute. Respondent took over the operations of the Old Fashioned 5
Barber and hired all its former employees, as well as their supervisors. It continued the same
hair cutting business at the same location, servicing the same customers, for at least 10 months
after the takeover. The employees did the same jobs they did before the takeover. There was no
break in service, and, indeed, Respondent dealt with the Union to a certain degree, although it
declined to adopt the old contract or formally recognize the Union. The evidence is thus 10
overwhelming that, at the time of the takeover, there was a substantial continuity of the
enterprise, certainly from the standpoint of the employees. Accordingly, although the
Respondent was not obligated to apply the existing contract to the employees, it was a successor
under the applicable authorities discussed above, and it had the resulting obligation to bargain
with the Union.15
Nor does Respondent dispute that it failed to notify the Union or give it an opportunity to
bargain before making changes to employee commission rates and enforcing dress code rules,
which are clearly mandatory subjects of bargaining. The changes and dress code enforcement
were established by the uncontradicted testimony of two employee witnesses, the only employee 20
witnesses who testified in the trial. Tr. 116-117, 154-157. Even though the changes were made
at about the time of the move to the new location, the successorship bargaining obligation had
attached 10 months before and was still in existence. Before Judge Marcionese, Respondent did
not assert that the employees had rejected the Union; nor did it present evidence to overcome the
Union’s presumption of majority support. Thus, here again, the facts and the law support the 25
General Counsel’s theory of violation.
In these circumstances, the General Counsel was not only substantially justified in
alleging and litigating the bargaining violations in the complaint, but, as Judge Marcionese
seemed to suggest in his decision, the violations would probably have been established had the 30
General Counsel succeeded on the jurisdictional issue. He noted that the evidence “would
suggest a general refusal to bargain,” thus implicitly recognizing a successorship obligation. He
also noted that the evidence showed that Respondent “did not notify the Union in advance before
it changed the commission rate and began to enforce the existing dress code.”7 My independent
analysis of the evidence confirms these views. Thus, I have no difficulty in denying the 35
Respondent’s EAJA application.
Respondent’s EAJA reply (EAJA R. 12-13) repeats its challenge to the successorship
allegation in its post hearing brief to Judge Marcionese (Br. 57), because its intended new
business focus included more women customers and required licensed cosmetologists rather than 40

7 Contrary to Respondent’s suggestion (EAJA R. 19-20), Judge Marcionese did not absolve it of
liability for the unilateral dress code change. While he acknowledged that there was an existing dress
code, he also noted that it “may not have been enforced” under the predecessor; and he specifically stated
that the Respondent did not notify the Union before it “began to enforce the existing dress code.” This
was certainly a change in employment conditions and it is certainly enough to show that the General
Counsel had a substantial justification for that allegation.
JD–66–16
7
barbers (Br. 57). But that alleged new focus was not effectuated until Respondent’s move to its
new location 10 months after its takeover from the predecessor. And it is clear, as a matter of
law, that successorship is measured at the time of the takeover, as shown above. At that point,
Respondent was free not to hire the predecessor’s employees and to set the initial terms under
which it would employ them. Respondent did not avail itself of this opportunity. It not only 5
hired all of the old employees and their supervisors, but, according to the uncontradicted
testimony of the only two employees who testified, their working conditions remained the same.
Indeed, as Judge Marcionese found, things remained the same for 10 months until Respondent
moved to its new location. Moreover, assuming that whatever changes took place at the new
location could be considered, it is hard to see how adding more women customers and requiring 10
cosmetology licenses would alter the continuity of the enterprise to defeat the bargaining rights
of the incumbent union. But even if these changes could somehow have resulted in a decision
favorable to Respondent, this would not render the General Counsel’s case without substantial
justification.
15
In its EAJA reply (EAJA R. 14-18), Respondent also repeats a contention made in its
brief to Judge Marcionese (Br. 60-64)—that its successorship bargaining obligation would not
attach, if at all, until it employed a “representative complement” of employees, which, in its
view, did not take place until it moved its location and employed a total of 9 employees. It is
unclear when exactly it hired new employees after the takeover, but Respondent asserted that, 20
when it moved to its new location, it employed 9 people, which presumably included
supervisors. At the time of the takeover, Respondent kept the 5 employees of the predecessor,
plus their 2 supervisors. Assuming the 9 employees it employed at the new location included 2
supervisors, this would mean that Respondent added a net of 2 employees thereafter, hardly a
significant increase from the complement at the time of the takeover. Moreover, R. Exh. 27, 25
which lists the employees on the payroll in August of 2012, seems to indicate that a significant
number of them did not work full-time hours. But, here again, even assuming some support for
the Respondent’s position on representative complement, the General Counsel’s contrary
position was not without substantial justification.
30
Finally, in its EAJA reply (EAJA R. 21-26 ), Respondent repeats an assertion made in its
brief to Judge Marcionese (Br. 52-55) to the effect that it had a viable defense to the substantive
complaint allegations under Section 10(b) of the Act. That assertion is without merit, but, in any
event, it does not show that the General Counsel lacked a substantial justification for the
complaint allegations. As Judge Marcionese recognized, the complaint does not allege a general 35
refusal to bargain. It only alleges a refusal to bargain “regarding two discrete subjects, i.e, the
change in commission rate and the adoption of a dress code.” Thus, the only unfair labor
practice allegations in this case involved the unilateral changes made after the facility was
moved, and the charge was filed well within the statutory 6 month period for those allegations.
Respondent focuses on the General Counsel’s contention that a successorship obligation was 40
established at time of the takeover, which it asserts was beyond the 6 month period. But the
complaint made no allegations of unfair labor practices at that point. In relying on the
successorship bargaining obligation that began at the time of the takeover and continued
thereafter, the General Counsel was presenting background evidence to show the existing
bargaining obligation that required Respondent to notify the Union and offer to bargain about the 45
unilateral changes. As the Supreme Court has recognized, Section 10(b) is a statute of
limitations, not an evidentiary bar, and “earlier events may be utilized to shed light on the true
JD–66–16
8
character of matters occurring within the limitations period.” Machinists Lodge 1424 (Bryan
Mfg. Co.) v. NLRB, 362 U.S. 411, 416-417.8
On these findings of fact and conclusions of law, and, on the entire record, I issue the
following recommended95
ORDER
The EAJA application for fees and expenses filed by Respondent is denied. 1010
Dated, Washington, D.C., July 12, 2016.
15
Robert A. Giannasi
Administrative Law Judge

8 It is, of course, of no consequence that the original charge, while using general language, focused
primarily on the successorship bargaining obligation, not the unilateral changes. As the Supreme Court
has stated, a charge is not the same as a pleading in a private lawsuit. It simply sets in motion the
machinery of an inquiry. Thus, it is well settled that a complaint may allege other matters related to and
growing out of the charged conduct. NLRB v. Fant Milling Co., 360 U.S. 300, 307-309 (1959) (original
charge alleged general bargaining obligation, which was dismissed, but complaint later properly issued on
subsequent unilateral changes).
9 The General Counsel’s answer to the EAJA application also disputes the amount of the fees and
expenses sought by Respondent, which was augmented by a supplemental declaration filed at the time it
filed its reply. I do not reach this issue because, since the General Counsel’s case was substantially
justified, no fees and expenses are awarded.
10 If no exceptions are filed, as provided by Sec. 102.46 of the Board’s Rules and Regulations, the
findings, conclusions, and recommended order shall, as provided in Sec. 102.48 of the Rules, be adopted
by the Board and all objections to them shall be waived for all purposes.