BRATTLEBORO — A law firm representing the court-appointed receiver of Koffee Kup Bakery and its affiliated companies called pay issues reported by former employees and news outlets “a misconception.”
“No funds were removed from any employee accounts,” the Albany, N.Y. based law firm of Nolan Heller Kauffman LLP, which is representing receiver Ronald Teplitsky, said in a news release issued Tuesday.
Instead, the firm says employees received less in their accounts or in their paychecks than the company initially said would be paid.
Former employees in Brattleboro and Burlington locations previously described being paid for vacation time not used then having it taken out of their bank accounts last week after facilities abruptly closed on April 26 due to financial issues.
Justin Heller wrote in the news release that American Industrial Acquisition Corp., which purchased Koffee Kup on April 1, reneged on its promise to provide as much as $2.5 million in financial support to the company.
Heller also noted that AIAC was aware of there being “a significant amount of the employees’ accrued and unused [paid time off].”
“When AIAC decided a few weeks later not to fund Company operations and abruptly closed operations and terminated employees, it was aware that the accrued PTO would become due and payable to employees,” the release states. “AIAC has refused to fund these amounts, and is now attempting to foist that obligation onto the Receiver. However, the Receiver has no obligation to fund the Company’s pre-receivership obligations.”
The law firm said Koffee Kup employees were notified by the company’s owners that April 26 would be their last day of employment, then the company reported the final week’s wages with paid time off (PTO) to its payroll company for processing.
“The payroll company then notified direct deposit employees that their payroll deposits would include both wages and PTO, and issued paychecks that also included these amounts,” states a news release from the firm.
While Koffee Kup “had previously been advised that funds would be released for wages incurred by employees through the date the Company closed operations, the Company was also informed that PTO would not be paid from funds under the Receiver’s control, and would have to be paid by the Company or its owners. To compound matters, the payroll processing cycle required that the original payroll (including both wages and PTO), whether in the form of direct deposits or paychecks, had to be stopped and a new payroll (including only the wages due through termination) issued. This took over the weekend and added an extra day or two to amounts hitting former employee bank accounts.”
Overdrafts occurred, the firm said, “because the initial payroll notices and paychecks that included PTO were issued in error and had, in fact, not been funded, and employees received less in their accounts or in their paychecks than they were initially and incorrectly told by the Company would be paid.”
Most employees received their pay by direct deposit, according to the release. About 25 received paychecks.
Mike Griswold, former plant manager in Brattleboro, called the news release “clear as mud.”
“If the money was never in anyone’s account,” he said, “how were they able to spend it and be overdrawn when it left?”
He was one of more than 90 employees who found out they no longer had jobs at Koffee Kup in Brattleboro on April 26 after the facility closed. They received notice that Koffee Kup has been operating at a loss for some time and has been in default “of certain terms and conditions of its outstanding loans with its lenders.”
On May 5, Teplitsky was appointed receiver in a lawsuit against Koffee Kup filed by KeyBank, the primary lien holder, in Vermont. His task is to “preserve and maximize the value of the Company’s assets,” according to the release.
“Under the court order, the Receiver is required to pay expenses incurred during the course of the receivership, but not expenses incurred by the Company prior to the receivership, such as Company payroll obligations,” the release states. “Nevertheless, recognizing the impact of the closure on employees, the Receiver, with KeyBank’s consent, agreed to fund the Company’s final payroll for wages and salaries in an amount in excess of $200,000. KeyBank had previously consented to funding the prior payroll period in an amount in excess of $400,000.”
The receiver plans to file opposition to a motion made by the company in court May 10 asking the court to require the receiver to pay the PTO. Citing the pending motion, Justin A. Heller of Nolan Heller Kauffman declined to comment.