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Attorney General Donovan Requests That Bankruptcy Court Order Paid-Time-Off Be Paid to Former Koffee Kup Employees

August 27, 2021

Contact: Charity Clark, Chief of Staff, 802-828-3171

MONTPELIER – Attorney General T.J. Donovan today filed a brief to appear in bankruptcy court in support of Koffee Kup Bakery. At issue is an involuntary bankruptcy petition filed by several creditors of Koffee Kup, which has resulted in a delay of paying former employees’ their collective balance of paid-time-off (PTO) amounting to $838,299 in total. In its brief, the State argues that the PTO should not be considered part of the bankruptcy case and should be paid now in accordance with a prior state court order that, last month, compelled the PTO payment.

“Koffee Kup employees are owed their paid-time-off and cannot wait any longer,” said Attorney General Donovan. “These payments should not be held up in bankruptcy court.”

Last month, the State appeared in a state court proceeding to support Koffee Kup in paying the employees PTO. The employees were supposed to be paid their PTO by a court-appointed receiver, but technical issues arose with the payment processor. As a result, payment of the PTO was stalled. On August 17, 2021, several creditors of Koffee Kup filed a petition for an involuntary bankruptcy. The receiver claims that it can no longer pay the PTO while the bankruptcy petition is pending. The State argues in its brief that the PTO is an exception to the bankruptcy matter. First, the State argues the PTO amounts to a constructive trust whereby the money already belongs to the employees and is no longer an asset of Koffee Kup. Second, under the broad powers of a bankruptcy court, the Court may authorize payment to a creditor under circumstances like this. Finally, payment of the PTO is appropriate under the duties of receivership law and the broad remedies of Vermont’s Consumer Protection Act.

A copy of the State’s motion to intervene is available here and its brief here.