A federal court in Burlington last Thursday found that Koffee Kup, which closed in 2021, violated the federal law when it laid off hundreds of employees without sufficient notice.
On April 26, 2021, Koffee Kup, Vermont Bread Co. and Superior, all bakery facilities owned by Kup Co., a holding company, stopped operations.
Stuart Miller, an attorney representing the employees, estimates that 400 people were laid off.
Koffee Kup employed 156 people at its Burlington facility and 91 employees worked at the Brattleboro-based Vermont Bread Co., according to a notice filed with the Vermont Department of Labor. Superior operated in Connecticut.
KK Bakery Investment Co., whose sole owners were Leonard Levie and Jeffrey Sands, had bought a controlling share of Kup Co. on April 1. In turn, KKBIC is an affiliate of American Industrial Acquisition Corp., a company owned and managed by Levie.
Judge William K. Sessions found Thursday that all three entities are liable for the failure to give employees sufficient notice, as required by the WARN Act — the Worker Adjustment and Retraining Notification Act.
The plaintiffs are seeking $3.6 million plus legal fees and interest.
Miller said the receivership will not have enough money to pay the entirety of the employees’ claim. He said the receiver has set aside $700,000, which would pay about 20% to 25% of the claim. The rest, he said, will have to be recovered from the owners.
Federal law requires companies with 100 or more employees to give employees 60 days’ notice when it lays off 50 or more people at any given location, provided that those employees represent more than a third of the employees at that location.
The Koffee Kup employees received no advance warning. The layoff notices, dated April 26, said the bakeries were closing that day. Some employees were handed the notices the next day. Notices were mailed to all employees between April 27 and April 29.
On April 29, some of the laid-off employees sued on behalf of all the laid-off employees, claiming they were not given the notice required under the WARN Act.
On May 6, the commissioner of the Vermont Department of Labor at the time, Michael Harrington, wrote a letter to Sands, who had signed the layoff notices, asking why notice was not given in accordance with Vermont’s Notice of Potential Layoffs Act. He received a response from a company attorney claiming that Koffee Kup was a “faltering company” facing “unforeseen business circumstance.”
On March 17, 2022, Linda Joy Sullivan moved to intervene as the dissolution receiver for Koffee Kup.
Under the “unforeseen business circumstance” exception, a company does not have to provide 60 days’ notice if the layoffs could not have been foreseen 60 days before they happened. Under the “faltering company” exception, if the company was actively seeking investors to stave off closing and in good faith believed that disclosing layoffs would scare off investors, it is excused from the 60-day notice.
Based on that response, the general counsel for the Vermont Department of Labor determined that Koffee Kup was justified in not meeting the 60-day notice requirement.
But courts have held that, for a company to avail itself of the exceptions to the 60-day rule, it must provide at least some notice. Since Koffee Kup and its owners provided no notice, Judge Sessions found that they could not use that defense.
In addition, he said, the “unforeseen business circumstance” must be from an outside force, and he found none in this case. As for the “faltering business” exception, Judge Sessions found that Levie and Sands had plenty of funds to save Koffee Kup had they chosen to do so, and did not need outside investment.
Judge Sessions found Koffee Kup and its owners liable for back pay and benefits for the laid-off employees, with the amount of damages to be determined in future court proceedings.
“The direct employer, Koffee Kup, was liable simply because it was the employer and didn’t give 60 days’ notice,” said Miller, the employees’ attorney, explaining the decision. The owners were liable, Miller explained, because they controlled the company and made all employment decisions, including the one to lay people off.
Attorneys for the receiver and for the owners did not immediately respond to requests for interviews.
