Koffee Kup's Burlington facility on Riverside Avenue
A former Koffee Kup Bakery employee has filed a federal class-action lawsuit against the company claiming it violated federal rules by suddenly closing earlier this week.
The complaint in U.S. District Court in Vermont alleges the longtime doughnut and bread maker violated the federal Worker Adjustment and Retraining Notification Act, or WARN Act, which requires companies with more than 100 employees to provide 60-day notice to employees — as well as local and state officials — before mass layoffs.
Koffee Kup employed more than 150 people at its Burlington bakery and nearly 100 in Brattleboro, according to the Vermont Department of Labor. The company laid off about 500 people in total, including those at a third bakery in Connecticut.
Plaintiff Matthew Chaney worked at the Brattleboro bakery until April 26, when the immediate closure was announced, according to the complaint. He is requesting class-action certification to represent all similarly situated employees.
The closure came just weeks after the private-equity firm American Industrial Acquisition Corporation purchased Koffee Kup on April 1. An announcement of the sale described a company poised to grow, not one in danger of closing.
"AIAC has significant experience partnering with manufacturing and distribution businesses and is well positioned to continue the expansion of KKB [Koffee Kup Bakery], capitalizing on operational improvements and driving growth momentum forward," read a press release by advisory firm G2 Capital Advisors.
The company filed a WARN notice on April 26, the day of the closure, writing to the Vermont Department of Labor that it had been losing money for years and that its lender had declined to float additional cash or extend a forbearance agreement.
The lender sent default notices last week and demanded immediate payment of outstanding loans, Jeff Sands, a Vermont-based advisor to AIAC, wrote in the filing.
"Koffee Kup no longer has sufficient capital to continue operations,” he wrote.
The federal WARN Act includes an exemption for "unforeseeable business circumstances," but still requires that employers give as much notice as practicable and explain the reason why they provided less than 60-days' notice, according to the U.S. Department of Labor.
"I don't believe that, under the circumstances, a same-day notice was as soon as reasonably practicable," said Stuart Miller, a New York attorney representing Chaney whose firm specializes in WARN Act cases. "It's almost never the case that something was so sudden and dramatic that you couldn't give more than one day's notice."
Koffee Kup looked for other investors or lenders to keep the company solvent, Sands wrote in the Monday filing. Earlier public notice of expected layoffs would have jeopardized those efforts, he wrote.
Sands provided the letter to Seven Days upon request but declined to comment on the record. AIAC's lawyers were not immediately available for comment.
Vermont also has its own version of the federal WARN Act. On Friday, Labor Commissioner Michael Harrington said the department had notified the company that it did not comply with the state's notice timeline and asked for more information about what led to the closure.
He said that if owners don't divulge the possibility of closure as part of a "good-faith effort to try to salvage a company," they could be exempt from the notification requirements.
"It will be up to them to show us that they had been making a good-faith effort," Harrington said.
The lawsuit seeks a judgment requiring Koffee Kup to pay 60 days' worth of salary and benefits, interest and attorneys' fees.