Teamsters Challenge Ruling that Yellow Did Not Violate WARN Act

Days after a bankruptcy court ruled that Yellow Corp. was not liable for failing to provide enough notice to union employees before laying them off, the Teamsters said the union would appeal the decision.

On March 4, the Teamsters’ national freight director John Murphy told local branches that the union took several issues with the ruling, which will require appeals to higher courts than the Delaware court that has presided over the case.

No details have been provided on when the Teamsters plan to appeal the ruling, or how long an appeals process would take.

For the ruling in question, Judge Craig Goldblatt said the bankrupt trucking firm was a “liquidating fiduciary,” rather than an employer covered by the Worker Adjustment and Retraining Notification (WARN) Act, when the layoffs occurred.

Yellow no longer was a “business enterprise” once it made its final delivery on July 29, 2023, the court determined. As such, Yellow did not have to provide a 60-day notice ahead of the abrupt layoff of 22,000 Teamsters employees on July 30—the day the company officially ceased operations.

The court also ruled that even if Yellow was still a WARN-covered employer, the 60-day claims would be reduced to 14 days’ worth of back pay and benefits.

“On a global scale, the Union believes the Court’s reading of the WARN Act can render the Act meaningless by allowing employers to avoid liability all together by waiting until after they have shut down operations before notifying their employees that they are being terminated,” said Murphy in his memorandum. “Teamster members should not be subject to a different standard than other Yellow employees simply because our members worked loyally until the bitter end.”

Yellow had already settled a class action lawsuit in January related to the WARN notices across two separate groups of claimants that went in the workers’ favor. A group of 3,200 non-union workers and a group of 482 mostly union workers settled for undisclosed amounts.

While the former employees tied to the class action suit had initially sought about $240 million in claims, the settlement only netted them a combined $12.3 million.

For the impending appeal, the union is still seeking contract claims for vacation pay, sick pay and other paid time, as well as grievance pay. According to Murphy, Judge Goldblatt’s ruling and the appeal should not affect the union’s ongoing efforts to reconcile the claims.

“We are appealing this ruling and we will continue to pursue our members’ contractual and WARN claims,” a Teamsters spokesperson told Sourcing Journal. “The bankruptcy process must be overhauled to protect workers from vulture corporations like Yellow.”

Teamsters president Sean O’Brien has been publicly critical of U.S. corporate bankruptcy laws, and has pointed to Yellow’s rapid closure as an example of why the process should be reformed.

In the months after Yellow’s bankruptcy, O’Brien called on Congress to seek out new regulations to protect existing collective bargaining agreements. The outspoken union head sought a guarantee that contracts would be honored even after a company goes bankrupt.

The Teamsters also seek to establish legal safeguards to protect earned pension credits and retirement benefits, all while ensuring workers they get severance pay after an insolvency.

Although Yellow had skipped a $50 million payment for Teamsters’ healthcare and pension benefits ahead of the bankruptcy, the company had approved various executive retention bonuses. That missed payment was a major contributor to the union’s decision to threaten a strike, further accelerating the trucking company’s demise as more clients diverted freight to other customers.

Less than two years after the missed payment, Yellow’s estate is still stuck in a legal skirmish with its pension funds over $6.5 billion in liability claims. Five of the funds have claimed Yellow owes them a combined $540 million for withdrawing from their plans when it shut down. However, the less-than-truckload (LTL) provider won a partial victory in that battle in February, as Goldblatt ruled that the funds set the company’s withdrawal liability too high.

Beyond its current legal issues, the insolvent trucking firm is still selling off its real estate through private sale transactions, as well as through a three-day auction process that will take place from March 25-27. The initial binding bid deadline ahead of the auction is March 21 at 5 p.m.