Yellow’s fate likely in the hands of the Kansas District Court

The less-than-truckload shipping company Yellow Corp. has asked the US District Court for the District of Kansas to enter a temporary restraining order and preliminary injunction preventing the Teamsters union from a work stoppage.

A hearing is scheduled for Friday in Kansas City at 1:30 p.m. local time.

Thursday’s request follows a strike notice issued by the Teamsters earlier this week. The union is threatening to strike as soon as Monday in response to Yellow’s missed contribution payments to the Central States Funds. The airline has previously asked central governments to postpone payments due on July 15 and August 15, but the request was turned down.

“In the absence of an injunction, Plaintiffs will suffer immediate, substantial and irreparable harm from Defendants’ unlawful work stoppages, including being forced into a Chapter 7 liquidation bankruptcy,” the filing states.

The company is asking the court to order the union to immediately engage in the grievance procedures outlined in the collective agreement as talks have broken down between the parties on the carrier’s second phase of a restructuring called “One Yellow.”

This change of operations seeks to make changes similar to a first phase implemented in the western part of Yellow’s (NASDAQ: YELL ) network last year. The plan calls for the consolidation of terminals, more flexibility around work rules and increased use of third-party transport, which Yellow claims is necessary for survival.

Since the two parties have been unable to reach an agreement in recent months, the carrier’s liquidity position has eroded rapidly.

A recent filing with the Securities and Exchange Commission showed the company had more than $100 million in cash at the end of June. However, in recent weeks shippers have been diverting freight from Yellow, and brokers and intermediaries have removed the carrier as a capacity option from their platforms, moves made to prevent shipments from being stuck in Yellow’s network should the carrier close.

Health, welfare and pension payments to the central states for the two-month period equate to about $50 million, of which Yellow is believed to be half criminal. Without payment, approximately 10,000 Teamsters at YRC Freight and Holland covered by the plan will be without health insurance on Sunday. The company’s participation in the pension scheme will also end on that day.

However, the delays are likely to extend beyond that.

A series of letters from July 12-13 between Yellow CEO Darren Hawkins and Teamsters General President Sean O’Brien show the company will also miss payments to its second and third largest funds, affecting more employees and potentially expanding the number of workers who will strike.

“The urgency is so great that even if the company has made its required contributions to nearly all of the benefit funds due this week, our current cash position will prevent the company from making contributions to the three largest health, welfare and pension funds in which Yellow participates – Central States, Western Conference and Central Pennsylvania,” Hawkins told O’Brien in a July 13 letter.

A Wednesday letter to the congregation of the local union in Denver that represents employees at YRC Freight and Reddaway said that if the company does not pay, it will be without coverage after July 31 and that it will also prepare for a strike.

The written exchange between Hawkins and O’Brien also referenced what would equate to an $11-an-hour increase in wages and benefits over a five-year contract period, contingent on full implementation of the One Yellow initiatives.

“I am fully aware that making such a significant financial proposal before we even sit down at the negotiating table is, to say the least, unorthodox. However, the company’s acute liquidity crisis and its absolute need to make progress at the negotiating table require us to approach these negotiations in a fundamentally different way,” Hawkins stated in the offer.

O’Brien asked for precise terms and said Yellow would have to drop the breach-of-contract lawsuit against the Teamsters. Yellow countered with $2.19 an hour in the first year, saying it would suspend legal proceedings “upon the successful conclusion of our negotiations.” The company also disclosed that it would not make any future payments to the said funds, as O’Brien considered the offer a “hypothetical increase” and “contingent on future events”, likely referring to a previous letter of agreement offered by Yellow.

That letter of agreement offered a 60-cent-an-hour wage increase, in addition to highlighting the contractual 40-cent increase that will start Oct. 1. However, the company said it did not have the ability to finance the increase and that lenders would have to sign off on it at a later date.

O’Brien also said in his letter that Yellow’s deferral of contributions would allow local union members affected by the lost payments to “exercise the rights local unions have under the existing collective agreement under such circumstances,” with the inference being a work stoppage. He also said that the salary increase had to be implemented immediately to continue.

“Simply put, implement the $2.19 per hour increase on July 1, 2023, and then we will discuss potential next steps.”

The back and forth seems to have ended there.

“No adequate remedy exists to compensate the plaintiffs for the Union’s failure to follow NMFA’s grievance procedures and the plaintiffs’ resulting loss of customers and termination of operations,” Yellow’s court filing states.

More FreightWaves articles by Todd Maiden

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