Yellow's Teamsters get $17.2M WARN Act settlement, three years late
Former drivers will receive five days of back pay under federal law, plus full PTO and sick leave, ending litigation over the 2023 shutdown.
How much will former Yellow drivers receive from the WARN Act settlement?
Former Yellow Corp. employees will split approximately $17.2 million in WARN Act claims under a settlement reached with the bankrupt estate, despite two courts ruling the company wasn't liable for the 60-day advance notice requirement. The deal gives most workers five days of damages under federal law. Employees covered by New Jersey's state WARN Act will receive 30 days of damages.
The settlement also allows $1.2 million in grievance claims that were pending when Yellow shut down in July 2023, and $1.8 million in claims for unused personal holidays for Teamsters in New York, New Jersey, Pennsylvania, and Western locals.
Yellow terminated 3,500 nonunion employees on July 28, 2023, and 22,000 union employees two days later. The company filed for bankruptcy on August 6, 2023.
Why the reduced payout when courts ruled in Yellow's favor
A bankruptcy court in Delaware previously determined that Yellow qualified as a "liquidating fiduciary" winding down affairs, not an operating business, at the time of the layoffs. That status exempted the company from WARN Act requirements. The court also found Yellow appeared to act in good faith, but added that if its interpretation was wrong, back pay should be limited to 14 days, not the full 60 days requested.
The U.S. District Court in Delaware later affirmed that finding and added that Yellow also qualified under a separate exemption as a faltering company.
A Tuesday memo from a Teamsters director to Yellow Corp. local unions said the union chose to settle rather than continue litigation with an uncertain 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 stated.
Full payment on PTO and sick leave
The settlement reiterates a prior agreement in which the estate will pay employee claims totaling $71.5 million for paid time off, sick leave, and other claims. Former Yellow Teamsters are expected to receive full payment on their PTO and sick-time claims.
A per-person cap of $22,650 is in place, split between $15,150 for priority claims and $7,500 for additional benefit claims. The memo noted that a few employees have claims exceeding the cap amount. Those excess amounts will be paid at the same rate as general unsecured claims, which is projected to be less than 20%.
Payments are expected to be distributed "within months" of the court's approval, assuming no further appeals.
What had to happen for the deal to close
The settlement still requires signatures from both parties and approval by the federal bankruptcy court in Delaware. The memo said no further objections are expected. Yellow's largest shareholder, MFN Partners, has withdrawn its objection to the bankruptcy plan confirmation, removing a major obstacle.
The bill for 22,000 drivers out of work
The combined settlement, including the $71.5 million in PTO and sick leave, the $17.2 million in WARN Act claims, and the additional grievance and holiday claims, totals more than $91 million in payments to former employees. That figure represents the cost of shutting down a 22,000-driver operation without the standard 60-day notice period.
For small fleets watching carrier failures, the settlement shows the gap between what federal law requires and what bankrupt estates actually pay. Yellow's drivers are getting five days of back pay instead of 60. The difference between a court ruling in your favor and cash in hand can stretch three years and end with pennies on the dollar.
