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Sunday, April 27, 2025
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Yellow settles WARN claims from nonunion employees for $12.3M

Yellow Corp. revealed at a January hearing that it had come to terms with nonunion employees regarding a failure to provide 60 days’ notice ahead of mass layoffs in 2023. Friday filings in a federal bankruptcy court in Delaware showed the settlement amounts.

The defunct less-than-truckload carrier has settled Worker Adjustment and Retraining Notification Act claims from two separate plaintiff classes for a total of $12.3 million.

The Moore class, a group of approximately 3,200 nonunion employees so named for the lead plaintiff, will receive payments totaling $8.75 million. The agreement requires the parties to release one another from further legal action pertaining to the WARN Act. However, the releases do not cover other employee claims alleging missed payments for health coverage, paid time off and commissions.

Counsel for the Moore class will receive one-third of the settlement amount plus litigation costs and other expenses. The three Moore class representatives will get $25,000 each, for “their service on behalf of the Class Members,” with the remainder presumably split across all claimants.

Most former employees in the Moore class had already signed severance agreements releasing the company from further liability. The court previously ruled that those agreements were enforceable.

The Coughlen claimants, a group of 492 mostly union employees, will get $3.55 million for both their WARN and PTO claims. Attorneys for the class will be paid $1.75 million plus $60,000 in expenses. Mutual releases will also be required.

Photo: A sign at a Houston terminal announcing Yellow’s July 30, 2023 closure (Jim Allen/FreightWaves)

The court ruled Wednesday that Yellow (OTC: YELLQ) was not liable for WARN claims from 22,000 union members. The fact that it made its last shipment hours before laying off union employees meant it was merely a “liquidating fiduciary” at the time, not an employer subject to the WARN Act.

The roughly 3,500 nonunion employees terminated two days prior, while Yellow was still an operating company making shipments, triggered WARN liability. However, the court ruled that a reduction in the claim amounts was warranted as Yellow acted in good faith when planning and preparing the WARN notices.

Appeal challenging PBGC rules, fate of $6.5B in pension claims moving forward

A separate filing with the court on Friday showed an appeal from Yellow, its largest shareholder (MFN Partners) and MFN affiliate Mobile Street Holdings will be moving forward in the U.S. Court of Appeals for the 3rd Circuit. The appeal challenges a prior ruling in the Delaware bankruptcy court that said pension insurer Pension Benefit Guaranty Corp.’s (PBGC) rules around the recognition of government bailout funds are valid.

The 2021 American Rescue Plan Act (ARPA), which bailed out underfunded multiemployer pension plans (MEPPs), allowed the PBGC to place guardrails around the program to ensure funds would only be used to cover plan benefits and costs, and to keep employers on the hook for withdrawal liabilities.

Pension Benefit Guaranty Corp. decided that special financial assistance awarded to the MEPPs wouldn’t be recognized as a plan asset until the money was actually received, and that recognition of those funds would be phased in even though they were distributed in a lump sum. The goal was to keep contributing employers from seeking an early withdrawal as immediate recognition of the money would mean the plans are fully funded, removing any unfunded vested benefits and consequently an employer’s withdrawal liability.

Yellow and MFN contend ARPA can’t place conditions on a third party, in this case an employer. It said the rules haven’t yet been challenged in a court, making it a matter of first impression, which should not be decided in a bankruptcy court.

Ultimately, Yellow asserts the plans are now fully funded following the bailout and that it has little to no withdrawal liability. If the rules are tossed out, Yellow estimates a $4.8 billion withdrawal liability claim from Central States Pension Fund could be worth as little as $40 million.

Yellow is facing withdrawal liability claims totaling roughly $6.5 billion.

More FreightWaves articles by Todd Maiden:

Teamsters’ WARN claims against Yellow fall short in federal bankruptcy court

Forward Air gains needed breathing room, awaits demand recovery

Trucking execs see green shoots as industry awaits upturn

The post Yellow settles WARN claims from nonunion employees for $12.3M appeared first on FreightWaves.

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