Yellow Corp. failed to provide sufficiently detailed notices to terminated employees when the trucking firm ceased operations in July 2023, a bankruptcy judge said in a memorandum opinion Thursday. But the company could still see reduced damages in a class-action lawsuit that has former workers seeking as much as $244 million in claims.
A lawsuit filed in the wake of the Yellow bankruptcy last August on behalf of more than 25,000 employees had argued that the company failed to provide 60-day layoff notices to employees as required by the federal Worker Adjustment and Retraining Notification (WARN) Act.
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A three-day trial surrounding these matters is scheduled to take place starting Jan. 21, 2025.
The less-than-truckload (LTL) carrier has defended its decisions, saying it was unable to provide earlier notice of the company’s shutdown under various exceptions set forth in the WARN Act, such as that it was a “faltering company” and enduring “unforeseeable business circumstances.” Under those exceptions, a 60-day notice period may be shortened.
Under the faltering company defense, Yellow said that it had been in discussions with various parties seeking to refinance existing debt as it became apparent in May 2023 that the company was rapidly running out of cash. The trucking firm believed that sending a WARN notice would “tank those efforts,” the judgment said.
And the “unforeseeable business circumstances” came when Yellow’s cash crunch forced the company to miss a $50 million payment to its pension funds that July—which prompted the Teamsters and its 22,000 Yellow drivers to threaten a strike within 72 hours.
This ultimately led to more customers abandoning Yellow for other carriers in the weeks ahead of the company’s Aug. 6 bankruptcy.
Judge Craig Goldblatt agreed that both of these exceptions were applicable to Yellow’s defense at the time, but that the form of notices given to both union and non-union employees “did not contain enough facts adequately to justify the reduced notice.”
“The notices that the debtors sent were inadequate,” Judge Goldblatt said. “The debtors emphasize that much of the information that should have been included in the notices was communicated separately to the employees and indeed was so widely publicized that it was well known to everyone and anyone. While there is some truth to that…it does not fully excuse the failure to send a compliant notice as the statute requires.”