Former drivers of Midwest Transport Inc. (MTI) have confirmed that while they received their final paychecks, the midwest transport company did not provide any severance pay following its abrupt closure. This sudden shutdown has left hundreds of drivers in a precarious position, highlighting the volatile nature of the freight and logistics industry and the challenges faced by those working in midwest transport roles.
MTI, a significant player in midwest transport, operated terminals across multiple states, including Greenup, Illinois; Harmony, Pennsylvania; Memphis, Tennessee; and two terminals in Florida, located in Tampa and Jacksonville. Despite the scale of the layoffs across these midwest transport hubs, FreightWaves confirmed that Midwest Transport Inc. failed to file the legally required WARN Act notices in any of these four states prior to ceasing operations. The Worker Adjustment and Retraining Notification (WARN) Act is designed to protect workers, their families, and communities by requiring employers to provide 60 days advance notice of plant closings and mass layoffs.
While the WARN Act does include exceptions for mass layoffs caused by unforeseen business circumstances, it remains unclear if Midwest Transport Inc. will attempt to invoke this exception. As of Friday’s publication, Joy Wernz, CEO of Midwest Transport (MTI), has not responded to interview requests from FreightWaves regarding the reasons behind the company’s decision to cease operations. The silence from leadership at Midwest Transport has further fueled speculation and concern within the midwest transport sector.
Prior to its closure, Midwest Transport was a substantial employer in the midwest transport landscape, boasting over 480 drivers and operating 428 power units, according to data from the Federal Motor Carrier Safety Administration’s (FMCSA) SAFER website. This sudden cessation of operations has created significant disruption in the regional midwest transport network and beyond.
Subcontractor Claims $1.3 Million Owed by Midwest Transport
Adding to the financial fallout from the Midwest Transport shutdown, a representative for a subcontractor who worked closely with MTI alleges that the midwest transport company owes his firm in excess of $1.3 million. This subcontractor, who preferred to remain anonymous due to fear of reprisal, stated that he was aware of Midwest Transport’s financial difficulties and was not surprised by the company’s closure.
The broker claims that Midwest Transport had recently agreed to a $40,000-per-week payment plan to address the outstanding debt. “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. This situation underscores the ripple effect of the Midwest Transport collapse on smaller businesses within the midwest transport ecosystem.
A potential factor contributing to the financial strain on Midwest Transport and other companies in the sector may be related to changes within the United States Postal Service (USPS) and its contracting practices. Midwest Transport had been heavily involved in highway contract routes (HCRs) for the Postal Service for approximately three years, even utilizing subcontractors for its freight auction contracts to manage fluctuating capacity needs.
However, in October 2021, the Postal Service introduced Freight Auction (FA), a system designed to solicit bids for mail transportation on an “as needed” basis. This new system provided the USPS with greater flexibility in scheduling trips without necessitating contractual amendments. While intended to improve efficiency, the transition to Freight Auction may have inadvertently created financial instability for some carriers heavily reliant on consistent USPS contracts, such as Midwest Transport.
Adding further complexity, in August, the Postal Service’s Office of Inspector General (OIG) released a critical audit of Freight Auction. The audit estimated that the Postal Service incurred over $199 million in “questioned costs due to the lack of a proper control environment” within the Freight Auction program. The OIG audit highlighted several areas of concern, stating: “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.”
According to the subcontractor, “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.” While this is an unconfirmed assertion, it points to a potential link between changes in USPS contracting and the financial difficulties experienced by Midwest Transport, ultimately leading to its demise as a midwest transport provider.
Prior to its closure, FMCSA data indicates that Midwest Transport had recorded 21 injuries and 42 tow-aways over the preceding 24 months. During the same period, the company’s trucks underwent 244 inspections, with 65 vehicles being placed out of service, resulting in a 27% out-of-service rate. This figure is notably higher than the national industry average of approximately 22%. In contrast, Midwest Transport’s drivers had a lower out-of-service rate of around 3% (16 out of 564 inspections), compared to the national average of 7%. SAFER database records show that Midwest Transport received citations for acute/critical violations in categories related to controlled substances/alcohol and driver fitness.
The future of Midwest Transport remains uncertain. While speculation among former employees suggests the company may be preparing to file for bankruptcy protection, no bankruptcy petition had been filed as of Friday afternoon. The sudden closure of Midwest Transport serves as a stark reminder of the challenges and vulnerabilities within the midwest transport industry, impacting drivers, subcontractors, and the broader freight network.
