Bankrupt Yellow Corp. is not liable for failing to give 60 days’ advance notice to its 22,000 union employees ahead of mass layoffs in 2023, according to a Monday ruling from the U.S. District Court in Delaware. The court affirmed a federal bankruptcy court’s previous decision, adding some minor exceptions.
The bankruptcy court previously ruled that the former less-than-truckload carrier qualified for an exemption to WARN Act requirements as it was a “liquidating fiduciary” winding down affairs, not an operating business, at the time of the layoffs. The prior ruling said Yellow didn’t qualify under a “faltering company” exception due to a technical error. The actual layoff notices issued to employees in July 2023 weren’t detailed and didn’t fully explain why the company was closing, voiding the faltering company defense.
That decision also said Yellow appeared to act in good faith and that if the court was found incorrect on its view of the WARN requirements, back pay and benefits should be limited to just 14 days, not the 60 days requested.
The Monday ruling affirmed the bankruptcy court’s ruling that “Yellow is not liable to the union members under the WARN Act,” and noted that Yellow did satisfy the requirements to qualify as a faltering company. The ruling also affirmed the bankruptcy court’s decision that Yellow was an employer under New Jersey law at the time of the layoffs. Any potential payouts to New Jersey employees were not quantified.
“I agree with the Bankruptcy Court that Yellow meets the ‘faltering company’ exception to the federal WARN Act, and I also agree with Yellow that the WARN Act notice it issued was sufficient to invoke that exception,” said U.S. District Judge Jennifer L. Hall. “Accordingly, the Order disallowing the federal WARN Act claims will be affirmed on alternative grounds.”
Yellow previously said its demise was accelerated when the Teamsters union issued a strike notice over missed benefits contributions. It said it had always been able to work out a deferral plan with its health and pension funds in the past and thought it could again reach a deal. The strike notice was called off just hours ahead of a planned work stoppage, but Yellow said the damage was done as its customers had already diverted freight to competitors.
Yellow terminated 3,500 nonunion employees on July 28, 2023, and 22,000 union employees two days later. The company filed for bankruptcy on Aug. 6.
Supreme Court not weighing in on pension liabilities
The U.S. Supreme Court decided Monday not to take up Yellow’s pension withdrawal liabilities case. (Employers party to multiemployer pension plans are required to pay their allocable share of unfunded vested benefits when exiting a plan.)
Yellow and its largest shareholder, MFN Partners, previously argued that the MEPPs were fully funded after receiving federal bailout money in 2021, leaving Yellow with no withdrawal liability. Yellow also argued that if it does have liability, the calculations that were used by the pensions and federal regulators were incorrect.
Yellow has agreed to terms with most of the MEPPs it once contributed to on behalf of employees. It is still at odds with three different plans. Litigation over those claims is scheduled to conclude in September.
The bankrupt estate is expected to soon transition to liquidating trust so final distributions can be made. (Employee claims for PTO and sick time have been classified as priority and will be paid.)
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