Trucking Giant Yellow Corp. Faces Damages in Class-Action Lawsuit
Bankruptcy Judge Rules on WARN Act Violations
A bankruptcy judge has ruled that Yellow Corp., a trucking firm that ceased operations in July 2023, failed to provide adequate notices to terminated employees, violating the federal Worker Adjustment and Retraining Notification (WARN) Act. The company may still face reduced damages in a class-action lawsuit seeking up to $244 million in claims.
Background of the Case
The lawsuit, filed on behalf of over 25,000 employees, alleges that Yellow Corp. did not provide the required 60-day layoff notices to employees as mandated by the WARN Act. The company defended its actions, citing exceptions in the act, including being a “faltering company” and facing “unforeseeable business circumstances.”
Exceptions to the WARN Act
Yellow Corp. claimed that it was in discussions to refinance its debt in May 2023, but sending a WARN notice would have jeopardized these efforts. Additionally, the company faced a cash crunch, missing a $50 million payment to its pension funds, which led to a threatened strike by the Teamsters and ultimately, the company’s bankruptcy.
Judge’s Ruling
Judge Craig Goldblatt agreed that both exceptions were applicable to Yellow’s defense, but the notices provided to employees were inadequate. The judge stated that while some information was communicated separately to employees, it did not excuse the failure to send a compliant notice.
Liquidating Fiduciary Defense
Yellow Corp. also argued that it was a “liquidating fiduciary” and no longer a “business enterprise” by the time it provided notices. However, the judge ruled that the company did not become a liquidating fiduciary until after it completed its last shipment on July 30, 2023, making it still an employer covered by the WARN Act at the time of the layoffs.
Upcoming Trial
A three-day trial is scheduled to begin on January 21, 2025, to determine the extent of damages and whether the liquidating fiduciary distinction will impact the 22,000 union employees. The trial may also reduce some of the class-action claims against Yellow if it is found to have acted in good faith throughout the issuing of WARN Act notices.
Ongoing Fallout from Bankruptcy
Yellow Corp.’s estate is still dealing with the aftermath of its bankruptcy and liquidation process. The company has agreed to sell off 12 terminals to competitors Estes Express Lines and R+L Carriers for $192.5 million and is still disputing claims with 11 pension funds totaling roughly $6.5 billion.
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