Yellow settles 2 classes of WARN claims

Two separate plaintiff classes with claims alleging that defunct Yellow Corp. failed to provide proper notification ahead of mass layoffs have been settled, a Tuesday hearing in a Delaware federal bankruptcy court revealed.

Counsel for Yellow said tentative agreements with the Moore class, approximately 3,200 nonunion employees, and Coughlen claimants, a group of 482 mostly union employees, were settled for undisclosed amounts.

Roughly 2,700 of the former employees in the Moore class had already signed severance agreements releasing the company from further liability. The court previously ruled that those releases are valid and enforceable.

The former less-than-truckload carrier released most of its nonunion employees on July 28, 2023, with Teamsters employees being released two days later – the same day it ceased operations. The company has said it didn’t have ample time ahead of the shutdown to provide 60 days’ notice as required under the Worker Adjustment and Retraining Notification Act.

The court previously ruled out the “faltering company” and the “unanticipated business circumstances” defenses proffered by Yellow (OTC: YELLQ) as justification for shortening the notification period. The former is allowed when a company is trying to work with lenders to obtain additional funding while the latter allows for a shortened notification period if the company didn’t have a reasonable expectation that it would fail when the notice was required – in this case late May 2023.

The WARN notices provided by Yellow were “insufficient” as they lacked detail the court said in December. Those notices excluded mention of a July 18, 2023, Teamsters’ strike notice over missed benefits payments, which Yellow said scared off customers and ultimately led to its demise.

Former Yellow CEO Darren Hawkins said at trial on Tuesday that WARN notices to union and nonunion employees contained different language, according to sources that were able to listen in on the closed portion of the trial. Hawkins said the company decided not to mention the damage the strike threat had in its layoff notifications to union employees to keep from further fanning the flames in what had become a heated public back-and-forth. He also said the company had previously pointed to the strike notice as the reason for its closure.

The timing of Yellow’s last shipment could determine if it can use a “liquidating fiduciary” defense. Yellow contends it saw no viable path forward on July 26, 2023, and that it was a fiduciary unwinding its affairs and preparing to sell assets at the time of its closure, not an employer. Yellow has said its last delivery was on July 29, 2023.

The court already sided with the nonunion WARN claimants who were terminated on July 28, saying Yellow was indeed an employer on that date. Whether or not it was an employer on July 30 will have bearing on the claims from roughly 22,000 terminated Teamsters. The court will rule on the company’s operating status and on whether Yellow acted in good faith in its handling of the WARN notifications. If the court finds Yellow was aboveboard the claim amounts may be reduced.

Separate testimony from Yellow CFO Dan Olivier on Tuesday provided some clarity on the last shipment, sources said. However, it wasn’t determined when the last delivery was made by a city driver and whether trucks returning to terminals on July 30 were pulling trailers. Those facts could determine if the company was operating as an active carrier at the time.

The court will also determine if certain employees who received severance payments are required to sign liability releases after the fact. Yellow accelerated severance payments to some employees ahead of its Aug. 6, 2023, bankruptcy filing with the expectation that employees would later sign a release. It said it did so to avoid the payments getting delayed by its bankruptcy petition to the court.

These items are expected to be decided during a three-day trial that began on Tuesday.

More FreightWaves articles by Todd Maiden: