BRATTLEBORO — Frank Machado, a former route driver for Koffee Kup Bakery, started his new job Thursday, less than two weeks after the Vermont-based bakery abruptly closed.
That morning, Machado’s last paycheck from Koffee Kup — nearly $2,000 for his last day of work and 112 hours of unused time off — had been deposited into his bank account. By Saturday, most of the money was gone.
Machado, a Mattapoisett, Mass., resident who now works for the Massachusetts bread distributor La Marca & Sons, said he knows of many former Koffee Kup employees whose pay for unused time off was issued and then rescinded last week.
“It’s like putting it on a fishing line and then pulling it away,” he said Monday.
Koffee Kup, which owns the Brattleboro-based Vermont Bread Co., closed April 26, several weeks after it was acquired by the New York City private equity firm American Industrial Acquisition Corp. (AIAC).
Nearly 250 people were laid off in Vermont: 91 at the Vermont Bread Co. plant on Cotton Mill Hill in Brattleboro and 156 at Koffee Kup’s location in Burlington, Vt. Workers at the bakery’s facility in North Grosvenordale, Conn., were also laid off, according to a notice filed with that state’s Labor Department.
The compensation for unused time off was cut from workers’ paychecks as part of an ongoing dispute between AIAC and a court-appointed receiver, Ronald Teplitsky, who manages Koffee Kup's financial assets, his attorney said Tuesday.
In a written statement, the attorney, Justin Heller, said Teplitsky had agreed to release funds for Koffee Kup employees’ final wage and salary obligations — more than $200,000 — but that AIAC is responsible for compensating workers’ unused time off.
After its closure, however, Koffee Kup told its payroll processer to include both the unpaid wages and time off in workers’ final paychecks, according to Heller. Teplitsky then declined to provide the compensation for unused time off, so the paychecks were stopped and re-issued with only wage and salary obligations, Heller said.
That process caused the disparity in what workers initially thought they would receive and their final compensation, he said, as well as the delay in when that pay was delivered.
In his statement Tuesday, Heller blamed AIAC for avoiding what he said is its obligation to compensate former Koffee Kup workers for their unused time off.
“AIAC has refused to fund these amounts, and is now attempting to foist that obligation onto the Receiver,” he said.
AIAC adviser Jeff Sands did not respond to multiple requests for more information on the missing pay. Sands told WCAX that he is not directly involved in payroll operations.
Koffee Kup produced baked goods — including bread, donuts and English muffins — and distributed products to more than 4,500 locations in the Northeast and mid-Atlantic regions, according to an April 7 news release announcing its acquisition by AIAC. It employed 500 people across its three facilities at the time, the release stated.
In a separate news release April 27, Sands said that Koffee Kup had suffered financial losses in each of the past four years. The bakery had been unable to find a new investor “willing to commit the resources necessary to bring the company back to health,” he said.
AIAC informed Koffee Kup employees of the bakery’s closure April 26, the day it happened, Sands told The Sentinel previously — though Machado said he learned of the closure from news reports.
Machado’s final paycheck for $1,971 covered his final day at work and paid time off that he had accrued, he said Monday. All of it was revoked before a much smaller amount — his final day’s wages — was returned Saturday, he said.
“It was a good chunk of money,” he said. “… I just wanted what was due to me. They kicked us again when we were down.”
The loss of that compensation left some workers in a precarious financial spot, according to Machado.
“There’s some people who went into the red over it,” he said. “Some people live week to week.”
Teplitsky, a partner at the New York business adviser Next Point, was tapped to manage Koffee Kup's finances earlier this month after KeyBank sued the bakery following its closure.
In a complaint filed April 30 in the Vermont Superior Court's Chittenden County branch, KeyBank claimed that Koffee Kup had not repaid more than $7 million in loans from the bank. The lawsuit also named Koffee Kup's former majority owner, KUP Co., and Vermont Bread Company as defendants.
On Monday, Koffee Kup asked that Teplitsky release nearly $800,000 to compensate workers for their unused time off, according to a court filing. In its request, the bakery argued that Teplitsky is required to satisfy those obligations under his appointment as receiver.
Teplitsky plans to oppose that request and have the court resolve the dispute, Heller said Tuesday, adding that Teplitsky “has no obligation to fund the Company's pre-receivership obligations.”
Koffee Kup’s closure also prompted a class-action lawsuit in the U.S. District Court for Vermont alleging the bakery did not give employees sufficient notice of its mass layoffs. The lawsuit — which seeks to recover wages and benefits for former workers — claims the layoffs violated a federal law requiring employers to give workers, states and municipalities 60 days’ notice before plant closures or mass layoffs.
AIAC has cited an exception to the reporting requirement if it “would have precluded the employer from obtaining the needed capital or business.” The company couldn’t provide earlier notice about the closure because it was exploring ways to continue operating, according to mass-termination notices that Sands filed with the state last month.
Vermont’s Labor Department is also reviewing whether Koffee Kup gave sufficient notice of its mass layoffs under state law, Commissioner Michael Harrington said after the bakery’s closure. That statute has reporting requirements similar to federal law, though Harrington said there are also exceptions to its rules.
Editor's note: This article has been updated with additional information about Koffee Kup’s court-appointed receiver, Ronald Teplitsky.