Yellow Corp. Teamsters will receive some WARN Act money even though two separate courts found the company was not liable for failing to give 60 days’ advance notice as required by federal law ahead of its July 2023 shutdown.
A Tuesday memo from a Teamsters director to Yellow Corp. local unions said the IBT had reached a settlement in principle with the bankrupt estate allowing the additional claims. The plan includes approximately $17.2 million in claims pertaining to the WARN Act. The deal represents five days of damages under the federal law, with employees falling under the New Jersey WARN Act receiving 30 days of damages.
The agreement also calls for the allowance of $1.2 million in grievance claims that were pending when the company shut down, and $1.8 million in claims for unused personal holidays for New York, New Jersey, Pennsylvania and Western Teamsters that are allowed per their contracts.
The memo also reiterated a prior agreement in which the estate will pay employee claims totaling $71.5 million for paid time off, sick leave and other claims.
“The Teamsters leadership chose full payment on contract claims and some recovery on the WARN Act over years of additional litigation on the WARN Act claims with an uncertain outcome,” the memo said.
The deal still has to be signed by both parties and approved by a federal bankruptcy court in Delaware. However, the memo said no further objections are expected, noting that Yellow’s largest shareholder, MFN Partners, has withdrawn its objection to a bankruptcy plan confirmation.
Teamsters that were employed by Yellow are expected to receive full payment on their PTO and sick-time claims. A per-person cap of $22,650 is in place ($15,150 for priority claims and $7,500 for additional benefit claims). The memo noted that a few employees have claims exceeding the cap amount and that excess amounts will be paid at the same rate as general unsecured claims, which is projected to be less than 20%.
Payments are expected to be distributed “within months” of the court’s approval, assuming no further appeals.
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, 2023.
The bankruptcy court previously determined that Yellow was a “liquidating fiduciary” winding down affairs, not an operating business, at the time of the layoffs, thus exempt from WARN Act requirements. That decision also said Yellow appeared to act in good faith, but 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 U.S. District Court in Delaware later affirmed the bankruptcy court’s finding, adding that the company also qualified under a separate exemption as a faltering company.
Why it matters? Former employees have some clarity on their financial recovery, which now includes reduced WARN Act payments. Full payment of accrued PTO and sick leave will be distributed within months of the bankruptcy court granting final approval.
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