Former owner of Bainbridge Bakers ordered to make good on employees’ missing paychecks

Published 4:09 pm Tuesday, October 6, 2015

The former owner of Bainbridge Bakers has been ordered to pay more than $17,000 in unpaid wages to his employees at the iconic downtown cafe.

Mike Loudon, who owned the popular but financially troubled bakery before it was sold this summer, was also hit with $8,000 in penalties for multiple violations of state wage laws.

Loudon, who did not immediately respond to a request for comment Tuesday by the Review, remains under investigation by state officials for not paying employees at the popular Winslow coffee shop.

The state Department of Labor & Industries launched a probe of the 30-year-old bakery earlier this year after employees complained about not getting paychecks. The business was abruptly closed in April and one employee launched an online appeal to cover payroll on GoFundMe, an online fundraising site, saying that $100,000 was needed to cover workers’ salaries.

Less than two weeks later, Bainbridge Bakers announced it was closing for a reorganization.

Records released Sept. 30 by the Department of Labor & Industries show the state has been investigating 12 cases involving employees who were not fully paid in the weeks following the closing of the bakery.

A state investigator determined that a dozen employees were owed back wages — including three who were each due more than $3,000. All told, approximately $26,379 was owed to 12 workers at the bakery who filed complaints over missing wages.

Eight of the cases were cited in the state’s citation of the business for violating state wage laws. State officials said Loudon did not pay his employees the hourly wage that had been agreed to, and the eight employees mentioned in the citation never received final paychecks.

Documents released last Friday detailed the state’s attempts to get Loudon to pay his employees what they were due.

In a June 22 email to Loudon, the owner of the bakery before it was closed and sold to new owners three months ago, a state investigator warned Loudon that the state would be issuing a citation and “notice & order of assessment” for the unpaid wages, and Loudon would also be assessed a $1,000 penalty for each case that would raise the amount of missing wages and penalties to $40,000.

An official with the Department of Labor & Industries noted last week that Loudon’s business was still part of an open investigation.

Records released by L&I also show Loudon repeatedly reassured workers at the bakery in the months before its closure that he would make good on their overdue paychecks.

Loudon, in a message to employees on Feb. 25, told workers that their latest paycheck would be nearly three weeks late.

“I have delayed on this set of checks because I haven’t had the cash flow to cover this payroll,” he wrote. “I am not trying to make this your problem, because it is mine, alone. I want to assure you that you will be paid for the hours you have worked, and that I am doing everything I can to come up with a solution to this problem.”

In the message, Loudon also said both of the bakery’s locations, on Winslow Green and at Island Gateway, near the Bainbridge art museum, both had a “very poor fourth quarter.”

Sales at the Winslow Green location, he wrote, averaged $70,000 in the five months of October through February, well below average monthly sales of $85,000 to $90,000.

Loudon also claimed the bakery’s finances were hurt by employee theft.

“The money skimming that occurred between Oct. and Jan. took another $17.5K from the bottom line,” Loudon said in his note to employees.

The claim of employees stealing from the business has not been substantiated, however. When the claim of employee theft first surfaced during the bakery’s troubles this spring, Bainbridge Island police said they hadn’t been told of any problems at the cafe, except for a report of a theft totaling $159 that was made in January.

In his Feb. 25 message to employees, Loudon said hours and service changes would be made at the bakery’s Island Gateway location — that cafe was soon shuttered in the weeks to follow – and he also said employee salaries would likely be frozen and there would be a reduction in hours and the elimination of some positions.

“I’m sorry we’ve gotten to this point. I am totally responsible,” Loudon said in his message to employees. “I spent way too much time not believing that employees were stealing from me during the last quarter of the year. When I finally allowed myself to admit that it was happening, and come up with a solution, I ignored the fact that regular Oct.-Dec. performance had been dismal. Corrective actions should have been taken before Christmas.”

He also vowed to get paychecks issued on time, and said that closing either or both bakeries “would be the absolute, last recourse.”

In a March 10 message to employees, Loudon noted that Feb. 15 paychecks had been issued but that March 1 paychecks had not been processed.

He also noted that revenue from the two locations was not enough to cover business costs and salaries. He asked employees to sell more, be careful and not waste ingredients, limit their work hours and be productive while at work, and also to “be cheerful, be a problem-solver and have fun.”

Loudon continued to hold out hope for employees through April that they would be paid for their work at the cafe.

In an April 22 message to employees, he said that he was still working with a team of advisers to get financing to cover payroll.

All four pay periods — March 1, March 14, April 1 and April 15 — would be rolled into one check.

If financing couldn’t be obtained for a lump sum payment, he added, workers would be paid based on each paycheck, from the oldest to the newest, until the money ran out.

“I know how important this is and I am humbled by your patience,” Loudon wrote. “I have several smart and aggressive people helping me with this and difficult as the last two months have been, getting the money to allow us to cover these past payrolls remains top priority, ahead of everything else.”

The bakery closed less than a week later.

Some of the employees, though, had already started filing complaints over missing wages against the business.

Three were received by April 16, and five more complaints were submitted by the first week of June.

Department of Labor & Industries issued a citation for wage payment violations against Loudon and Bainbridge Baking Company on Sept. 18, seeking $25,485 in missing wages.

The missing wages covered the time frame of Feb. 10 through April 23.

The state cited 16 violations, and said unpaid wages, plus interest, totaled $17,485.

Eight penalties of $1,000 each were also assessed.

State officials said Loudon was personally liable for the missing wages, as he had full control over the financial decisions of the business. L&I also noted that he continued to employ workers with the promise of future pay without having the resources to honor the paychecks.

The business was told it would have to send in a payment for the missing wages, interest and penalties, or appeal the citation, by Oct. 18