Former Yellow Corp. employees are set to recover part of the money they sought under the federal WARN Act after the Teamsters reached an agreement in principle with the company’s bankrupt estate.
A memo issued Tuesday by a Teamsters director to local unions said the International Brotherhood of Teamsters (IBT) had negotiated a settlement that will allow approximately $17.2 million in WARN Act claims to be recognized.
The agreement provides for damages equivalent to five days under the federal WARN Act. Employees covered by the New Jersey WARN Act would receive a larger recovery equivalent to 30 days of damages.
The settlement comes despite rulings by two courts that found Yellow was not liable for failing to provide the 60 days of advance notice required under federal law before the company shut down in July 2023.
Additional employee claims included in the agreement
The proposed settlement goes beyond WARN Act claims. It also provides for the allowance of approximately $1.2 million in grievance claims that remained pending when Yellow ceased operations.
Another $1.8 million would be recognized for unused personal holidays owed to Teamsters in New York, New Jersey, Pennsylvania and Western Teamsters, where those benefits are provided for under collective bargaining agreements.
The agreement also confirms an earlier arrangement under which the bankruptcy estate will pay $71.5 million in employee claims covering paid time off, sick leave and other contractual claims.
According to the Teamsters memo, union leadership opted for a settlement that secures full recovery on contractual claims and at least a partial WARN Act recovery rather than pursuing additional litigation for years with no guarantee of a better outcome.
“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.
Bankruptcy court approval still required
The settlement has not yet been finalized. Both parties must sign the agreement, which then requires approval from the U.S. Bankruptcy Court in Delaware.
The Teamsters memo said no additional objections are expected. It pointed to the decision by MFN Partners, Yellow’s largest shareholder, to withdraw its objection to confirmation of the bankruptcy plan.
Former Yellow union employees are expected to receive their PTO and sick-time claims in full, subject to a $22,650 per-person cap.
That ceiling consists of $15,150 in priority claims and another $7,500 in additional benefit claims.
A small number of employees have claims above the cap. Any amount exceeding the limit will instead be treated and paid at the rate applicable to general unsecured claims, which is currently projected to be less than 20%.
Payments are expected to be distributed “within months” after court approval, provided the settlement does not face further appeals.
Yellow’s 2023 collapse
Yellow eliminated 3,500 nonunion positions on July 28, 2023, followed two days later by the termination of 22,000 union employees. The trucking company filed for bankruptcy on Aug. 6, 2023.
The WARN Act dispute has been a central issue in the bankruptcy proceedings.
The bankruptcy court previously ruled that Yellow was acting as a “liquidating fiduciary” and winding down its affairs rather than operating as a functioning business when the layoffs occurred. On that basis, the court concluded that the company was exempt from the WARN Act’s advance-notice requirements.
The court also found that Yellow appeared to have acted in good faith. However, it stated that, if its interpretation of the WARN Act requirements were ultimately determined to be incorrect, any back pay and benefits should be restricted to 14 days, rather than the 60 days sought by employees.
The U.S. District Court in Delaware subsequently upheld the bankruptcy court’s decision. It also concluded that Yellow qualified for another WARN Act exemption covering a faltering company.
What the settlement means for former Yellow employees
The agreement gives former employees greater visibility into what they can expect to recover from the bankruptcy estate.
While the settlement does not provide the full WARN Act compensation originally sought, it establishes a partial recovery under the federal law while protecting full payment of accrued PTO and sick-leave claims, subject to the stated cap.
If the bankruptcy court grants final approval and there are no further appeals, those payments are expected to reach former employees within months.
