BRATTLEBORO – If Koffee Kup Bakery’s creditors’ request for involuntary bankruptcy is allowed, nearly 500 former employees who have been waiting nearly six months for more than $ 800,000 in paid vacation balances could only share one just over $ 12,000.
Under federal bankruptcy law, employee wages and benefits are considered unsecured debts, and these debts rank fourth in the pecking order for receiving compensation.
But, in documents filed Friday by Vermont Assistant Attorney General Justin Kolber, the only claim employees can make under bankruptcy law is wages and benefits earned “within 180 days of the date of the bankruptcy. filing of the request or the date of the termination of the debtor’s business … “
“If the petitioning creditors are successful here, it will mean an almost total loss of the employee’s PTO, from $ 821,862 (excluding interest) to just $ 12,044,” Kolber wrote.
April 26, nearly 500 Koffee Kup employees, including about 100 from its Vermont Bread Company subsidiary in Brattleboro, arrived at work only to find themselves locked out and unemployed. Although they received their last paychecks, they did not receive payment for their paid time off.
In early June, Georgia-based Flowers Foods purchased all of the assets except real estate from Koffee Kup in Burlingtion, Vermont Bread in Brattleboro and Superior Bakery in North Grosvenor Dale, Connecticut, but said it did not plan to reopen one of the bakeries at the time. Even though Flowers Foods recently bought the real estate, bakeries remain closed.
In mid-July, Chittenden Superior Court judge Samuel Hoar approved the payment of the paid vacation balances, but lawyers for Ronald Teplitsky, who was then the receiver of Koffee Kup’s assets, told the court that he had encountered a problem with the payroll processing. closed and was unable to complete the transaction. He signed with a new processor, but three days before the payments were made, creditors who say they owe more than $ 2 million filed for involuntary bankruptcy, freezing Koffee Kup’s assets.
Alexandra Edelman, counsel for Koffee Kup’s assets, which include proceeds from sales to Flowers Foods and accounts received after closing, noted in court documents that there was substantial additional funds, “in the millions “, available for distribution to creditors, including former employees.
The involuntary bankruptcy petition was filed by lawyers for Bernadino’s Bakery, Ryder Truck Rental, Lily Transportation and Hillcrest Bakery. During the hearings before Hoar, the applicants did not oppose the judge’s decision to pay the power take-off balances.
âThe attorney general’s office is shocked by the about-face of petitioning creditors,â Kolber wrote. âThe claimant creditors aggressively argue that ‘the prior consent of the claimant creditors is of little relevance.’â
The involuntary petition, Kolber wrote, is being used “like a sword to undo what they have accepted in state court …”
Under federal bankruptcy law, if the petition is continued, only paid time off earned in 2021 would be available to employees, Kolber wrote, bringing the total to $ 12,044.
“It would result in a serious miscarriage of justice for hard-working Vermont employees,” he wrote. “So this case is one of the strongest examples of unclean hands, and the action of the petitioner’s creditors should not be allowed here.”
Kolber also noted that because the creditors have agreed not to oppose the PTO payment in state court, they should not be allowed to use federal process to block the disbursement.
The “hiccup” during payment “does not change the extent of the receiver’s responsibilities to fulfill his obligations imposed by the state court,” Kolber wrote.
In the case, Kolber also rejected the petitioners’ reading of the labor law that Vermont employers are not legally obligated to pay vacation or a PTO.
“The Guide simply explains that Vermont employers are not legally obligated to pay vacation or paid time off,” he wrote. “However, and this is the crucial distinction, once an employer chooses to pay vacation as a benefit, those benefits must legally be paid … In this case, the petitioner’s creditors revealingly omit the fact that Koffee Kup Bakery has chosen to pay the time off as PTO pay. … This company policy is now considered a legal debt to employees and is immediately due and payable upon termination, â and within 72 hours of termination.
Even if the federal court allows the petition to continue, which the AG’s office objects to, the former employees should receive their PTO balances as ordered by Judge Hoar, Kolber wrote.
Edelman wrote that the Koffee Kup entities also oppose involuntary bankruptcy. She submitted a motion to the Federal Court allowing full payment of PTO balances to employees.