The Vermont Attorney General’s Office is going to bat for about 440 former employees of Koffee Kup Bakery who have been trying to collect more than $800,000 worth of paid time off that’s now tied up in bankruptcy court.
Koffee Kup and Vermont Bread Co. shut down their operations April 26, saying they were out of money. That abruptly ended the employment of 440 people, most of whom live in Vermont, the attorney general’s office said in its motion to intervene in the case, filed Friday in federal bankruptcy court.
The parties in the bankruptcy case agreed in July to pay the employees $821,862, plus $16,437 in interest, for a total of $838,299 for the paid time off they had accrued, and the bankruptcy judge made that part of an order.
However, in August, creditors petitioned the court to declare involuntary bankruptcy for Koffee Kup, an action that has slapped a hold on the payment for paid time off.
“Koffee Kup employees are owed their paid time off and cannot wait any longer,” Attorney General TJ Donovan said. “These payments should not be held up in bankruptcy court.”
The state is arguing that the accrued paid time off amounts to a constructive trust, in which the money already belongs to the employees and is no longer an asset of Koffee Kup. Second, the motion argues that the bankruptcy court is empowered to authorize payment under circumstances like this. Third, it argues that paying the money is the right thing to do under the laws of receivership and the broad remedies of Vermont’s Consumer Protection Act.
“There can be no question here that the petitioner-creditors are attempting to affect the economic well-being of hundreds of Vermont employees by stalling the payment of the employees’ PTO, and worse, apparently trying to reclaim the pool of PTO money for themselves, after they agreed to paying it out,” the state’s motion contends.
A copy of the state’s motion to intervene is available here and its brief here.
The bankruptcy court has not yet set a hearing on the state’s motion.
— Tom Kearney