Teamsters’ WARN claims fall short in federal bankruptcy court

A federal bankruptcy court in Delaware found that Yellow Corp. is not liable on claims from roughly 22,000 union employees for failure to provide 60 days’ notice ahead of mass layoffs in the summer of 2023. It said the company was a “liquidating fiduciary” winding down affairs and not an employer at the time the layoffs were ordered, releasing it from liability.

Yellow (OTC: YELLQ) determined on July 26, 2023 that it had no viable path forward and enacted a plan to shut down operations. It terminated nonunion employees on July 28, 2023, with union employees being let go two days later (July 30), the same day it permanently closed. Worker Adjustment and Retraining Notification Act notices were provided to employees but not 60 days in advance as the law requires. However, there are several exceptions that allow employers to shorten the notice period.

The liquidating fiduciary exception was one such applicable defense for Yellow.

The court said Yellow proved at a three day trial in January that its last shipment was made on July 29, 2023 at 11:30 p.m. EST, and that after that point, it was no longer an employer, simply a fiduciary focused on unwinding affairs and preparing to liquidate assets.

“In short, once an entity that is winding down has stopped running its business but is merely in the process of liquidating, it is no longer an employer, but is instead a liquidating fiduciary,” Judge Craig Goldblatt’s opinion stated.

He also said that even though Yellow had still had employees securing its terminals, prior case law, “makes plain that a defendant that has employees who are still working, but is no longer operating its core business functions, is not an ‘employer’ within the meaning of the WARN Act.”

The court previously said Yellow is liable for claims from some 3,500 nonunion employees, who were terminated on July 28 when the company was still making shipments even though the decision to shut down had already been made. It said those claims could be reduced as the company appeared to act in good faith when planning and preparing the WARN notices.

Goldblatt’s opinion also said that if the court is incorrect in determining that Yellow was not an employer when the layoffs were ordered, the claims should be reduced to account for 14 days of backpay and benefits, not 60 as previously sought.

“Because the debtors were a liquidating fiduciary as of July 30, 2023 (at the latest) the union members’ claims for WARN Act liability shall be disallowed. Alternatively, if there is any WARN Act liability, such liability shall be limited to 14 days of back pay and benefits per affected employee.”

Counsel for the union employees had argued at trial that Yellow may have intentionally delayed the termination orders to circumvent liability. However, the company said it waited until that Sunday, July 30, a day with very little activity and very few employees at its terminals, to terminate union employees. It said it did so to prevent any potential conflict or damage to property.

“But there is nothing to indicate that a decision as to when particular employees would be terminated was made or communicated to anyone on any date prior to the date on which the WARN notices were given,” Goldblatt said. “Because this is an issue on which the Teamsters bear the burden of proof, the absence of any evidence of an earlier ‘order’ (even on the broadest understanding of the term ‘order’) is fatal to their contention.

”Absolutely nothing in the trial record suggests that the debtors delayed making the announcement as part of a scheme to conduct an end run around the WARN Act.”

The court previously ruled that Yellow was entitled to other statutory defenses under the WARN Act as reason for shortening the notification period, but that insufficient details on the actual notifications to employees voided those defenses.

Two separate claimant classes already reached undisclosed settlements on their WARN claims against Yellow. Those settlements still need to be approved by the court.

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