Class-Action Lawsuit New Headache for Yellow
A former Yellow employee filed a class action lawsuit against the less-than-truckload (LTL) giant Tuesday for terminating 30,000 staff without giving advance notice.
According to the complaint filed in Delaware, Yellow dockworker Armando Rivera accused the company of violating federal law, as well as California and New Jersey state laws, by failing to provide Worker Adjustment and Retraining Notification (WARN) Act notices to employees prior to their mass layoffs.
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Federal and California laws require a 60-day layoff notice, while New Jersey requires 90 days.
Yellow declined to comment.
The lawsuit includes all affected employees at Yellow and its four operating companies, YRC Freight, Holland, New Penn and Reddaway.
According to the Department of Labor, the federal WARN Act requires employers with 100 or more full-time employees to provide a 60-day advance written notice of a worksite closure affecting 50 or more employees. This also applies to a mass layoff affecting at least 50 employees and one-third of the worksite’s total workforce or 500 or more employees at the single site of employment during any 90-day period.
Not all dislocations require a notice, which is the lawsuit’s central point of contention.
The WARN Act makes exceptions when employers can show that layoffs or worksite closures happen because a company falters or faces unforeseen business circumstances or natural disasters. In such instances, the WARN Act requires employers to provide as much notice to their employees as possible.
In its letter to the Teamsters Sunday indicating that it stopped operating, Yellow executives said they were not able to provide earlier notice of the shutdown as it qualifies under the “unforeseeable business circumstances,” “faltering company” and “liquidating fiduciary” exceptions set forth in the WARN Act.
Yellow still has yet to officially file for bankruptcy, or publicly acknowledge the reports that it has ceased operations, despite the Teamsters breaking the news of the firm’s demise. The company has a rocky relationship with the union, with Yellow suing the Teamsters last month for meddling with a much-needed restructuring strategy.
Last Friday, the trucking company reportedly laid off an unknown number of corporate employees, most of whom were non-union workers in IT, customer service and sales. None of the unionized drivers and freight handlers were part of the layoffs.
And yet despite the LTL firm’s hope of selling off its third-party logistics (3PL) business to raise cash, a report said the company laid off its entire unit of roughly 100 to 150 people on Tuesday.
The lawsuit seeks wages and benefits for the required notification periods. 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.
While there are nearly 30,000 jobs at stake, many believe that LTL competitors will snap up newly out-of-work Yellow talent.
“These folks are going to get absorbed,” said Dr. Thomas Goldsby, professor and Haslam Chair of Logistics at the University of Tennessee’s Global Supply Chain Institute. “It may not still be a Teamsters deal, but if they’re willing to start over again with a new carrier, they’ll be just fine. Because there is still just that need, even with goods demand softening and more people buying services and experiences. There’s there’s still demand in this field.’
American Trucking Associations (ATA) even created a database to help former Yellow employees find new jobs in the trucking industry.
As for Yellow itself, the future remains cloudy. According to Bloomberg, private equity firm Apollo Global Management was nearing a deal to provide new capital to keep the near-bankrupt freight giant afloat.
This could play out in Yellow’s favor in the lawsuit, because the trucking company could argue that it was in the process of obtaining financing and issuing WARN notices would have deterred potential investors.
The Yellow layoffs come as another heavy hitter in the supply chain trims head count. FedEx supply chain businesses will close two warehouses in Fort Worth, Texas and York, Pa., according to WARN notices, resulting in the loss of 500 jobs combined. Up to 280 people workers at the Texas distribution center will be laid off on Sept. 23, while 220 in Pennsylvania will be dismissed Sept. 30.
