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Abrupt layoffs center of lawsuit against Yellow

An aerial photo of a Yellow terminal in Houston

Investors are still awaiting news of Yellow’s fate. (Photo: Jim Allen/FreightWaves)

A class-action suit filed Tuesday against Yellow Corp. said the company failed to provide a required 60 days’ layoff notice to its 30,000 employees.

The complaint was filed on behalf of California dockworker and union steward Armando Rivera and other “similarly situated former employees” in the U.S. District Court for the District of Delaware. Approximately 600 employees at a terminal in Bloomington, California, were terminated on or around Friday without advance notice, according to the lawsuit.

The class action includes all affected employees at Yellow and its four operating companies — YRC Freight, Holland, New Penn and Reddaway — not provided Worker Adjustment and Retraining Notification (WARN) Act notices.

The suit seeks wages and benefits for the required notification periods (90 days in New Jersey compared with 60 days in other states). It also seeks severance pay of one week for each full year worked for employees in New Jersey. In addition, the state has a statute entitling employees to “an additional four weeks of severance pay” when companies fail to provide advance notice.

Yellow notified most of its 8,000 nonunion employees on Friday that they were being terminated. It posted signs at its terminals on Sunday saying the company had ceased all operations.

The Teamsters union said late Sunday night it was notified that the company was filing for bankruptcy.

Failure to reach an agreement with the Teamsters union over a change of operations likely accelerated the company’s demise.

When negotiating with the union, Yellow made it known that it would be out of cash as soon as last month. Its customers began diverting freight to other providers in efforts to avoid having shipments stuck in Yellow’s network should it shut down abruptly. The pace of those diversions surged when it didn’t make benefits payments, which triggered a threat of a work stoppage.  

Plaintiffs will have to navigate the WARN Act notice exception for abrupt shutdowns of failing companies. However, California and New Jersey have more labor-friendly interpretations of the law.

A separation agreement issued to employees at Yellow also referenced its WARN Act obligations, or lack thereof.   

“The Company was not able to provide earlier notice of the Shut Down as it qualifies under the ‘unforeseeable business circumstances,’ ‘faltering company,’ and ‘liquidating fiduciary’ exceptions set forth in the WARN Acts,” the agreement read.

Also, Yellow will likely argue that it was in the process of obtaining financing and that the issuance of WARN Act notices would have deterred potential investors.

The separation agreement also provisioned for two weeks of severance for employees with the company nine years or less, and 0.25 weeks for each year of service for employees with the company 10 years or more. The document showed employees would also be paid for earned wages and accrued paid time off.

On Tuesday, employees at Yellow Logistics said they were terminated abruptly after assurances the company had funds to keep the independent subsidiary afloat while its parent searched for a buyer.

More FreightWaves articles by Todd Maiden

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