Sudden layoffs in the middle of the trial against Yellow

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

A class action lawsuit filed Tuesday against Yellow Corp. said the company had not given a required 60-day layoff notice to its 30,000 employees.

The complaint was filed on behalf of California longshoreman and union steward Armando Rivera and other “similar former employees” in the U.S. District Court for the District of Delaware. About 600 employees at a terminal in Bloomington, Calif., were laid off on or about Friday without 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 – without Worker Adjustment and Retraining Notification (WARN) notices.

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

Yellow notified most of its 8,000 non-union employees on Friday that they were being laid off. It posted signs at its terminals on Sunday saying the company had suspended all operations.

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

Failure to reach an agreement with the Teamsters union on a change in operations likely hastened the company’s demise.

In negotiations with the union, Yellow made it known that it would be out of cash as early as last month. Its customers began diverting freight to other carriers in an effort to avoid getting shipments stuck in Yellow’s network should it shut down abruptly. The pace of these diversions increased when it failed to make benefit payments, prompting a threat of a work stoppage.

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

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

“The company was unable to provide earlier notice of the shutdown as it qualifies under the ‘unforeseeable business conditions,’ ‘faltering business,’ and ‘liquidating fiduciary’ exceptions set forth in the WARN Acts,” the agreement read.

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 contained provisions for two weeks’ severance pay 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 that employees would also be paid for earned wages and accrued time off.

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

More FreightWaves articles by Todd Maiden