A former employee of Midwest Transport Inc. claims the Robinson, Illinois-based trucking company, which contracted with the U.S. Postal Service to haul mail, violated the federal Worker Adjustment and Retraining Notification (WARN) Act by failing to give a 60-day notice of a planned shutdown before laying off 650 employees, including more than 480 drivers.
Anthony Ballog worked at the company’s Tampa Bay, Florida, facility until his employment was terminated on Monday. In a complaint seeking class action status, Ballog says he and other workers at MTI’s five facilities are entitled under the WARN Act to recover wages, accrued holiday and vacation pay, along with 401(k) contributions and ERISA benefits for 60 days after their terminations since the carrier employed 100 or more workers at the time of the mass layoff.
Attorney James E. Huggett of Margolis Edelstein filed the nine-page WARN Act complaint in the U.S. District Court for the District of Delaware on Monday, the same day as MTI’s closure.
FreightWaves broke the story of the closing on Sept. 6 after getting emails from former MTI drivers, who had received telephone calls from their regional managers on Sept. 5, notifying them that the company was winding down operations in four days.
Former drivers confirmed Friday that while they did receive their final checks, MTI didn’t provide severance pay.
MTI operated terminals in Greenup, Illinois; Harmony, Pennsylvania; Memphis, Tennessee; and two terminals in Tampa and Jacksonville, Florida. FreightWaves confirmed that MTI did not file WARN Act notices in those four states prior to its closure.
In some instances, the WARN Act makes an exception for mass layoffs caused by business circumstances that were not “reasonably foreseeable at the time that 60-day notice would have been required.”
As of publication Friday, Joy Wernz, CEO of MTI, had not responded to FreightWaves’ interview requests about what led to its decision to cease operations.
Before its closure, MTI had over 480 drivers and 428 power units, according to the Federal Motor Carrier Safety Administration’s SAFER website.
MTI subcontractor owed $1.3 million
An agent for a subcontractor that worked closely with MTI to cover certain highway contract routes (HCRs) for nearly three years claims he knew the trucking company was in financial trouble and wasn’t surprised by the news that it was shutting down.
The broker, who didn’t want to be named for fear of retaliation, alleges that MTI owes his company more than $1.3 million and had recently reached a $40,000-per-week payment plan agreement with the carrier.
“MTI paid the first payment of our agreement but announced it was shutting down when the second $40,000 payment was due so we are out a lot of money,” the broker told FreightWaves.
In October 2021, the Postal Service implemented Freight Auction (FA) to solicit bids to transport mail on an “as needed” basis with the flexibility to schedule trips without requiring contractual changes.
MTI, which had hundreds of highway contract routes with the Postal Service, subcontracted with brokers for its freight auction contracts to purchase extra capacity when needed.
However, in August, the Postal Service’s Office of Inspector General (OIG) released an audit of Freight Auction, which estimated that the Postal Service incurred over $199 million “in questioned costs due to the lack of a proper control environment.”
“The Postal Service’s FA program could have been more effectively planned, standardized, and executed with proper internal controls. Specifically, we found the FA policies and procedures were inconsistently applied across facilities; trip bids and awards lacked effective safeguards; trip payments and the supporting documentation for proof of delivery lacked proper controls; implemented system control requirements were not effective to safeguard against inaccurate supplier payments; supplier performance was not routinely monitored; and the FA contracts were not in compliance with the Service Contract Act requirements,” the OIG audit stated.
“The Postal Service realized they were overpaying contractors and started canceling contracts, which led to financial losses at Midwest Transport and other companies closing facilities or shutting down,” the MTI subcontractor said.
Prior to its closure, the trucking company had 21 injuries and 42 tow-aways over the past 24 months. FMCSA data shows the company’s trucks had been inspected 244 times, and 65 had been placed out of service for a 27% out-of-service rate over the preceding 24-month period. That is significantly higher than the industry’s national average of around 22%.
MTI’s drivers had been inspected 564 times, and 16 were placed out of service over a two-year period, resulting in an approximately 3% out-of-service rate. That is less than half the industry’s national average of 7%, according to FMCSA.
According to the SAFER database, MTI was cited for acute/critical violations in two categories: controlled substances/alcohol and driver fitness.
It’s unclear what MTI’s next steps may be. While some former drivers and other employees claim the now-defunct trucking company plans to file for bankruptcy protection, MTI had not filed a bankruptcy petition as of Friday afternoon.
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