Elon Musk’s Mass Twitter Layoffs Spur Legal Headaches

Elon Musk’s Mass Twitter Layoffs Spur Legal Headaches

Elon Musk’s journey as owner of Twitter was fraught from the beginning. But, after seven months of negotiations and a lawsuit, he’s now officially in charge of the microblogging platform and is facing a new wave of headaches. There are legal threats over mass layoffs, advertisers fleeing the platform and widespread backlash after his proclamation that blue checks would cost $20 per month — which Musk lowered to $8 after a public exchange with author Stephen King (whose response was, “Fuck that, they should pay me”).

Then, of course, there’s his $44 billion investment. Musk — who brought on outside backers including Oracle co-founder Larry Ellison, VC fund Sequoia Capital and cryptocurrency exchange Binance; convinced current equity holders Jack Dorsey and Prince Alwaleed bin Talal to retain their stakes in the company; and took out more than $13 billion in loans to fund his takeover — says the company is hemorrhaging money.

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His response? Ax half of the company’s employees. On the evening of Nov. 3, Twitter staff were notified via an internal memo that layoffs were imminent. Living under the sword of Damocles, staffers waited to receive an email the next day that would reveal their status: Some would be told their jobs were safe via their company account, while others would learn they were being laid off through a message sent to a personal email address.

Ultimately, about half of the staff was terminated, according to a tweet from Twitter head of Safety & Integrity Yoel Roth, who noted that his department was cut by only 15 percent. Other teams were nearly or entirely gutted, including Communications, Curation, Human Rights, Accessibility Experience and one known as META (Machine Learning Ethics, Transparency and Accountability). In all, roughly 3,700 people were impacted across the globe. “Regarding Twitter’s reduction in force, unfortunately there is no choice when the company is losing over $4M/day,” Musk tweeted Nov. 4.

Faegre Drinker labor and employment partner Gerald Hathaway says that if Musk’s losses claim is accurate, something had to be done, but he hopes other cost-saving measures were explored. “All layoffs are messy, and all involve moving targets,” says Hathaway. “A badly implemented layoff can cost a company more than was expected to be saved. I suspect this layoff is not being badly implemented, the unusual public attention being paid to it notwithstanding.”

As soon as that internal memo leaked, critics on Twitter and elsewhere on the internet immediately assumed Musk had run afoul of regulations regarding mass layoffs.

Under the federal Worker Adjustment Retraining Notification (WARN) Act, companies with more than 100 employees are required to give notice before a layoff if it affects more than 500 people, sometimes fewer if it’s at least a third of the workforce at any given site. Certain states have stricter guidelines. In California, any company with 75 or more employees requires notice for a layoff of 50 or more employees within a 30-day period — regardless of what percentage of the workforce that is. In New York, the act covers private sector employers with 50 or more employees and WARN notices are required if the layoff affects 33 percent of the workforce (at least 25 employees) or 250 employees from a single site.

Screenshots of the emails to staff quickly began making the rounds. Those who were let go were told they won’t be working anymore, but “will remain employed by Twitter and will receive compensation and benefits through your separation date of January 4, 2023.” Another version of the message listed a separation date of Feb. 2. Those timelines are consistent with the 60-day and 90-day notice periods required in California and New York, respectively. Terminated employees were also told other offboarding information including their severance offer and a Separation Agreement and Release of Claims would come later. A copy of the WARN notice and an FAQ document appear to have been attached. (The company didn’t respond to a question about the messages via email or a direct message on Twitter, which isn’t entirely surprising as nearly the communications team was reportedly laid off. Musk’s DMs aren’t open.)

Notes Hathaway, “It is perfectly fine to place employees on paid leave during a WARN notice period. Compliance with WARN, even with a paid leave for 60 days, is much cheaper than noncompliance.”

It’s important to note that severance doesn’t kick in until employment ends, so any compensation or benefits received in such an offer should come after and in addition to payment and benefits received during the WARN notice period. That’s also when employees would be expected to waive their claims against the company in exchange for that severance.

Employment lawyers consulted by The Hollywood Reporter criticize Musk’s approach, with one calling it “inhumane,” but it does appear he satisfied the requirements. According to three WARN notices obtained from the California Employment Development Department dated Nov. 4, the layoffs impacted nearly 1,000 employees in the state. Meanwhile, 418 people from the New York City office were let go, according to a WARN notice filed with labor officials there. (The notices are embedded below.)

Before the emails were sent, on Nov. 3, a group of five former Twitter employees filed a class action complaint alleging federal and state WARN Act violations. Three of those five say that on Thursday they “were locked out of their Twitter accounts, which they understood to signal that they were being laid off.” There are no details about one of the plaintiffs, other than that they live in Hawaii and work for Twitter headquarters. The last plaintiff, Emmanuel Cornet, alleges in the complaint that he was notified on Nov. 1 that he was “terminated effective immediately” and did not receive any severance. In a blog post written by Cornet that same day titled “Bye Twitter,” he said he thought he was terminated because of his “troublemaker” vibe. He referenced a run-in with HR over cartoons he created about life at Twitter, and said the day he was let go he had internally shared a browser extension he created to automatically download his Gmail conversations. Cornet also embedded what he says is a copy of his termination email, which states his “recent behavior has violated multiple policies.” The complaint characterizes his termination as “an early example of the anticipated mass layoff,” rather than a firing for cause.

Their attorney, Shannon Liss-Riordan, did not respond to a request for comment — but on Nov. 8 an amended complaint was filed. There’s still a WARN Act claim, which references Cornet and unnamed “other employees.” But, now, there are also breach of contract claims related to severance packages and remote work.

The April 25 merger agreement Musk filed with the SEC stated that during a period of one year following the deal close, Twitter would provide “severance payments and benefits … that are no less favorable” than the ones offered prior to the sale. While it’s unclear whether the SEC might take action if severance offers don’t meet that bar, Hathaway says “there were no contractual rights created by such statements for the benefit of employees.” 

Liss-Riordan argues the employees were third-party beneficiaries to the agreement, and that these “promises were communicated to employees orally (including at periodic ‘all-hands’ meetings) and in writing by Twitter’s management, including its former CEO, human resources personnel, and others.”

“For a number of employees who were laid off, Twitter did provide 60 days notice, and it informed them that they would receive severance pay in the amount of one month’s pay … following their termination date on January 4, 2023,” writes Liss-Riordan in the amended complaint. “However, Twitter’s previous policy had provided for greater severance pay and benefits for laid off employees. The previous policy had provided for at least two months’ pay (or more, depending on the employee’s length of service), bonus plan compensation, cash value of equity that would have vested within three months from the separation date, and a cash contribution for health care continuation.”

In that same Nov. 4 tweet that mentioned the financial losses, Musk said, “Everyone exited was offered 3 months of severance, which is 50% more than legally required.”

It’s unclear whether Musk was including the WARN notice payments in that reference to three months severance, but the complaint argues that he is indeed conflating the two.

Liss-Riordan is asking the court to stop Twitter from soliciting employees to sign separation agreements unless it informs them of their rights under WARN, as well as the existence of this suit, and gives them her contact information. She is currently representing a different set of plaintiffs in a similar complaint against Musk’s other company, Tesla. That fight was compelled to arbitration in October. (The Hawaii-based employee appears to have survived the layoffs, but the amended complaint alleges Musk is revoking the option to work remotely and the person missed out on the chance to look for a new job when the market was “more favorable.”)

In addition to the litigation from those workers, Musk has drawn the ire of users over his bedside manner amid the layoffs and future plans for the platform.

“The way Musk/Twitter let people know they might be laid off, and then informed those who were laid off that they were in fact chosen for layoff, was extremely disrespectful of the workers and how much a job loss affects their lives,” says employment attorney Ann Fromholz of The Fromholz Firm. “And as discussed all over social media, the teams Musk chose to eliminate appears to say a lot about his priorities for the company going forward.”

In addition to the blue-check debacle — which now may or may not include “official” labels that can’t be bought — he’s taking heat over his anticipated unbanning of Donald Trump, stance on parody accounts and indications he’ll scale back moderation in the name of free speech. (Though he promised advertisers it won’t become “a free-for-all hellscape.” )

Twitter power users have been expressing dismay about whether to leave the platform and whether there’s a viable alternative. While some have already left, others are taking a wait-and-see approach, reluctantly conceding to Musk’s point in a Nov. 8 tweet: “Twitter is the worst! But also the best.”