In the aftermath of Central Freight Lines’ abrupt closure five weeks ago, many of the company’s 2,100 employees, including 1,325 truck drivers, have paycheck concerns and questions about vacation pay and unemployment benefits, while others claim they were subjected to unsafe working conditions at the company’s headquarters in Waco, Texas.
However, many of their questions have yet to be answered as no one is answering the phones at HQ, although some CFL employees continue working on a contract basis to collect accounts receivable and recover assets as the company proceeds with its plan to wind down operations next month.
After news broke on Dec. 11 that CFL was shuttering operations after 96 years, a source close to CFL told FreightWaves the company had “too much debt and too many unpaid bills” to continue operating, despite exploring all available options to keep its doors open.
Some salaried and hourly employees, who stayed on through the end of the year after the company’s initial mass layoff on Dec. 13, claim their final checks still haven’t arrived or don’t accurately reflect the correct number of hours they worked to help collect accounts receivable or recover assets to sell during the wind down.
“Payroll due through last Friday has been paid and the intention remains to pay the accrued vacation pay,” a company source told FreightWaves on Thursday.
It’s unclear how many former CFL employees and drivers are owed vacation pay. However, some sacrificed valuable time with their families during the holiday season to ensure the remaining freight in the LTL carrier’s network was delivered.
“We were always so short-staffed and everything was so chaotic at the end that I gave up time I could have spent with my family to make sure trucks and freight were where they needed to be,” a former employee told FreightWaves. “Now I’m worried that I may not get the money I am owed.”
One former employee said she is owed nearly 18 hours of vacation, which was reflected on the pay stub she received after Christmas. Although she stayed on to help during the wind down, her last check, which she received Friday, shows she is owed three hours of vacation pay.
“I lost almost 14 hours of pay and there’s no one left in HR to call,” the former employee told FreightWaves on Monday.
The carrier’s abrupt shutdown was unexpected for many of CFL’s employees as the industry was reporting record-high rates for LTL freight. However, the carrier was plagued by debt and hemorrhaging cash.
Former CFL President Bruce Kalem likened the LTL carrier’s demise to a “five-year death spiral” after the company lost a major customer, then acquired two failing companies.
“Years of operating losses and struggles for many years sapped our liquidity and we had no other place to go at this point,” Kalem told FreightWaves.
Kalem said the company’s revenues were around $262 million for fiscal year 2020, but that the carrier lost over a quarter of a billion dollars in a five-year span after losing e-commerce giant Amazon’s business over a pricing dispute in 2016, combined with the losses it incurred after acquiring two failing companies, Wilson Trucking and Volunteer Express.
Jerry Moyes, a founder and former owner of Swift Transportation, purchased the struggling LTL carrier in 2006 and pumped in millions of dollars of his own money to keep the struggling company operating, according to multiple sources.
Some tenured drivers were hopeful that Moyes’ deep pockets could keep Central Freight afloat after rumors had swirled for years about the carrier’s financial health.
Questions remain about payroll and benefits
As the company continues to collect receivables and sell off assets to pay down its debts, CFL is further hindered by a significant IRS tax lien, although CFL wouldn’t confirm the exact amount, leaving former employees and drivers with lingering doubts about whether there will be any money left in the pot to pay their vacation hours.
Earlier this month, CFL sent out COBRA coverage paperwork to workers and drivers who lost their health insurance on Dec. 31. Some former employees claim the company inadvertently mailed their benefit information to the wrong addresses. The employees said calls to CFL’s HQ to try and rectify the issue went unanswered.
“I tried calling the office to let them know that I had someone else’s mail or someone else had mine, but no one answered the phone,” a former CFL employee told FreightWaves. “I’m sure it was a spreadsheet problem because my home address was correct, but it was addressed to another employee that I happen to know who worked in the same office.”
The glitch with the COBRA paperwork raises concerns that CFL employees’ W-2s may also be mailed to the wrong addresses at a time when the IRS is warning of massive backlogs and staffing issues because of office closures during the pandemic.
“I pray the glitch was just for HR documents and not payroll,” said the former employee, who is still waiting on her final paycheck.
Kalem, who is working on a contract basis to help with the wind down, told FreightWaves that workers’ W-2s will be mailed by the federal government’s mandatory deadline of Jan. 31. He added that he wasn’t aware of the address issue with the COBRA paperwork.
While many of Central Freight’s drivers were quickly snapped up by other LTL carriers offering competitive pay for qualified drivers, others haven’t landed new jobs yet and have questions about unemployment benefits.
Despite losing their jobs more than five weeks ago, some former employees, who filed for unemployment benefits shortly after the closure, claim they are still waiting for their first check or had to submit additional information or file an appeal in their home states, not in Texas where the company is headquartered.
Kalem said all taxes have been paid through the end of the year. However, he said CFL had until Jan. 15 to pay its fourth-quarter taxes. He declined to comment on if those quarterly taxes had been paid.
If quarterly taxes aren’t paid, it could potentially impact unemployment benefits for former employees if the system shows they haven’t worked the minimum number of quarters to qualify.
Individuals who submit an unemployment claim are issued a “Statement of Wages and Potential Benefits Amounts,” which provides the claimant wage information that was reported by their base period employers and used to calculate unemployment benefits, according to Cisco Gamez, media and public relations specialist for the Texas Workforce Commission
“The form includes information on contacting TWC if the account or amounts are wrong and documents the claimant can provide so that TWC can investigate,” Gamez told FreightWaves. “TWC investigates if the claimant disagrees with the statement of wages.”
Unsafe working conditions
Prior to the company’s closure, former Central Freight Lines’ employees at its corporate headquarters in Waco claim they were exposed to unsafe working conditions, including suspected black mold, exposed electrical wiring, rodent droppings on work surfaces and standing water in parts of the building because of an ongoing leaking roof issue.
While Kalem confirmed there was a water issue because of the roof on the second floor in the former customer service department, he said affected employees were moved and efforts were made to address the leaky roof prior to the company’s closure. However, a permanent fix to address the roof was continuously delayed as negotiations stalled with the truck lines’ insurance company.
“It’s a 50-plus-year-old building, so it happens sometimes,” Kalem said. “There was an issue with the roof and the ceiling tiles but we didn’t put anyone in harm’s way.”
These photos from Central Freight Lines employees provided to FreightWaves show some of the work conditions at the main office in Waco, Texas. Images included exposed wires and insulation in the ceiling, mouse droppings and fallen tiles.
Although the customer service employees were moved to a different floor, up to 150 employees who worked at the Waco office and used the break room to warm up meals or grab refrigerated items had to pass through the waterlogged department with falling ceiling tiles and moldy insulation on a daily basis.
Kalem confirmed that the photos obtained by FreightWaves were those taken of the former customer service department in Waco.
“The photos make it look like we were running a sweatshop and that wasn’t the case,” Kalem said.
When it rained, employees around the building grabbed trash cans or buckets to prevent the water from dripping onto equipment, including computers and other electronics. Once the rain cleared, former CFL workers say, they were instructed by their managers not to dump out the stagnant water that would stay untouched for days because of “possible liability concerns.”
Instead, the employees were instructed to wait for CFL’s maintenance staff, which consisted of two or three people before the closure, according to Kalem, to service the nearly 200,000-square-foot building.
Prior to the closure, Kalem said CFL’s HQ housed about 150 employees.
“That’s possible they were told not to touch it, possibly knocking over buckets and stuff,” he said.
According to documents from the Occupational Health and Safety Administration, CFL has been fined more than $38,000 for various safety or health violations at three of its locations — Houston and Fort Worth, Texas, and Sacramento, California — since 2005. However, no violations were reported by OSHA inspectors at the truck lines’ home office in Waco.
Former employees at some of CFL’s 65 terminals also reported similar complaints about leaky roofs and other safety issues that weren’t addressed by management prior to the closure.
Some CFL truck drivers say they reported ongoing maintenance issues with the company’s trucks and trailers but their concerns were ignored.
Kalem disputes these claims and said prior to the company’s closure, it spent nearly $100,000 per week on equipment repairs.
PPP loan and pay cuts
During the onset of the pandemic, when CFL executives stated that revenue had dropped 33% over a two-week period, salaried employees were forced to take pay cuts of between 15% and 25%. Hourly employees were only allowed to work a maximum of 32 hours and local drivers were limited to 35 hours per week with no overtime.
Fifteen days after implementing the pay cuts and reduction of hours for employees and drivers, CFL was one of four trucking-related companies that received the maximum award of $10 million through the U.S. Small Business Administration’s Paycheck Protection Program (PPP) in mid-April 2020.
Despite the influx of cash through the forgivable loan program that was enacted to help struggling businesses pay employees, interest on mortgages, rent and utilities, former employees say they didn’t reap the financial reward as the company didn’t lift its newly implemented pay cut and hour reduction policy.
At the time of the company’s closure, former employees say their pay still hadn’t been restored to pre-pandemic levels, except for pay for linehaul drivers, which was increased by 20% in July and August to attract new drivers after losing 25% of its drivers last spring.
“Some of us who were single moms or one-income families were really hurt by this policy,” one former CFL employee told FreightWaves. “After we got the PPP money, we thought our pay and hours would return to what we made before COVID hit, but that didn’t happen.”
Do you have a story to share? Send an email to email@example.com.
Watch reaction to Central Freight Lines’ abrupt closure on WTT?!?