Bankrupt less-than-truckload carrier Yellow Corp. is not required to pay back wages or benefits to its 22,000 union employees for failing to give 60 days' advance notice before mass layoffs in 2023, according to a Monday ruling by the U.S. District Court in Delaware. The decision, reported by FreightWaves, affirms a prior bankruptcy court ruling and eliminates a significant potential liability for the bankrupt estate.
Court Affirms Faltering Company Exception
The district court agreed with the bankruptcy court that Yellow Corp. qualified for an exemption under the Worker Adjustment and Retraining Notification (WARN) Act as a 'faltering company.' U.S. District Judge Jennifer L. Hall wrote: "I agree with the Bankruptcy Court that Yellow meets the 'faltering company' exception to the federal WARN Act, and I also agree with Yellow that the WARN Act notice it issued was sufficient to invoke that exception. Accordingly, the Order disallowing the federal WARN Act claims will be affirmed on alternative grounds."
The bankruptcy court had previously ruled that Yellow was not an operating business at the time of layoffs but a 'liquidating fiduciary,' and that the company had acted in good faith. The earlier decision also limited any potential back pay to 14 days rather than the 60 days requested, if the court was later found to be incorrect.
Key details from the ruling:
- Yellow terminated 3,500 nonunion employees on July 28, 2023, and 22,000 union employees on July 30, 2023.
- The company filed for bankruptcy on Aug. 6, 2023.
- The court noted that Yellow did satisfy the requirements to qualify as a faltering company.
- Any potential payouts to New Jersey employees were not quantified, though the court affirmed Yellow was an employer under New Jersey law at the time.
| Ruling Aspect | Bankruptcy Court | District Court Affirmance |
|---|---|---|
| WARN Act liability | Not liable; qualifies as liquidating fiduciary and faltering company | Affirmed; added alternative grounds on sufficiency of notice |
| Back pay limitation | 14 days (if liability found) | Same |
| New Jersey law | Yellow is an employer | Affirmed, but no quantified payout |
Supreme Court Declines Pension Case
On the same Monday, the U.S. Supreme Court decided not to hear Yellow's challenge to its pension withdrawal liabilities. Yellow and its largest shareholder, MFN Partners, had argued that multiemployer pension plans (MEPPs) were fully funded after receiving federal bailout money in 2021, leaving no withdrawal liability. They also claimed the calculation methods used by pensions and federal regulators were incorrect.
Yellow has reached agreements with most MEPPs it contributed to but remains in dispute with three plans. Litigation over those claims is scheduled to conclude in September. The bankrupt estate is expected to soon transition to a liquidating trust so final distributions can be made, according to FreightWaves.
Strike Notice Accelerated Demise
Yellow had previously stated that its downfall was accelerated when the Teamsters Union issued a strike notice over missed benefits contributions. Although the strike notice was called off hours before a planned work stoppage, Yellow said the damage was done as customers had already diverted freight to competitors.
Implications for Shippers and Operators
For freight forwarders and logistics operators, the ruling removes a major claim against the bankrupt estate. Employee claims for paid time off and sick time have been classified as priority claims and will be paid. The upcoming transition to a liquidating trust means remaining claims — including any from the three disputed pension plans — will be resolved, allowing final distributions to creditors.
Watch List
- September 2026: Conclusion of litigation with remaining pension plans.
- Estate transition: Movement to liquidating trust for final distributions.
- New Jersey claims: Potential quantified payout for New Jersey employees may emerge.
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