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

Less-than-truckload 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 going out of business.

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

Thursday’s order follows a strike notice issued by the Teamsters earlier in the week. The union is threatening to strike as soon as Monday in response to missed contribution payments to central state funds. The carrier had earlier asked the central states to defer payments due July 15 and August 15, but the request was denied.

“In the absence of an injunction, the plaintiffs would suffer immediate, substantial and irreparable harm from the defendants’ unlawful cease-fire, including being forced into Chapter 7 bankruptcy liquidation proceedings,” the suit reads.

The company is calling on the court to direct the union to immediately engage in the grievance procedures set out in the collective bargaining agreement as talks between the parties over Phase Two of the restructuring of the carrier named One Yellow have collapsed.

This change in operations seeks to make similar changes to the first phase implemented in Yellow’s West (Nasdaq: Whoops) Network last year. The plan calls for standardization of stations, more flexibility around business rules and greater use of third-party transportation, all of which Yellow maintains are essential to its survival.

As the two parties have been unable to reach a settlement over the past several months, the carrier’s liquidity position has rapidly eroded.

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 brokers have removed the carrier as a capacity option from their platforms, and steps have been taken to prevent shipments from being stuck in Yellow’s network if the carrier were to shut down.

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The health, welfare and pension payments for the central states for a two-month period amount to about $50 million, of which Yellow is in arrears for half of what is assumed. Without payment, the 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 retirement plan will also be terminated on that day.

However, late payments 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 shows that the company will also miss payments to its second and third largest funds as well, affecting more employees and potentially increasing the number of workers who will go on strike.

“In fact, the urgency is so severe that even though the Company has made its required contributions to nearly all of the benefits funds due this week, our current cash position will prevent the Company from making contributions to the three largest health, care, and pension funds in which Yellow participates — the Central States, Western Conference, and Central Pennsylvania,” Hawkins told O’Brien in a July 13 letter.

A letter Wednesday to the rank and file of the local Denver union representing employees at YRC Freight and Reddaway said that if the company fails to pay it, it will be without coverage after July 31, and that it will also prepare to strike.

The written exchange between Hawkins and O’Brien also indicated the equivalent of an $11-per-hour increase in wages and benefits over a five-year contract, conditional on full implementation of One Yellow’s initiatives.

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“I am fully aware that making such an important economic proposal before we sit at the negotiating table is, to say the least, unorthodox. The company’s acute liquidity crisis and its sheer need to make progress at the negotiating table requires us to approach these negotiations in a fundamentally different way,” Hawkins said in the presentation.

O’Brien asked for exact terms and said Yellow would need to drop a breach of contract claim against the Teamsters. Yellow responded with $2.19 an hour for the first year and said it would waive legal action “upon the successful conclusion of our negotiations.” The company also disclosed that it would not make upcoming payments to the aforementioned funds, at which point O’Brien deemed the offer a “hypothetical increase” and “conditioned on future events,” likely referring to an earlier letter of agreement submitted by Yellow.

This letter of agreement offered a pay increase of 60 per hour, in addition to payment of the contractual increase of 40 percent beginning October 1st. However, the company said it did not have the capacity to fund the increase and its lenders would need to sign it off 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 missed payments to “benefit from the rights that local unions have under the current collective bargaining agreement under the circumstances,” with the conclusion that he has ceased operations. He also said that the wage increase must be implemented immediately moving forward.

“Simply put an increase of $2.19 per hour on July 1, 2023, and then we will discuss possible next steps.”

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The back and forth seems to have ended there.

“No adequate remedy could compensate the plaintiffs for the union’s failure to follow the NMFA grievance procedure and the plaintiffs’ resulting loss of clients and termination of operations,” Yellow’s motion in court read.

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