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Twitter’s Mass Layoffs Could Open Up a New Can of Worms for Elon Musk

Written by Kevin TruongPublished Nov. 04, 2022 • 11:37am
Elon Musk, Tesla CEO, stands in the foundry of the Tesla Gigafactory in Grünheide near Berlin during a press event on Aug. 13, 2021. | Photo by Patrick Pleul/picture alliance via Getty Images

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The long-feared mass layoffs at Twitter have started, potentially creating fresh headaches for a company battered for weeks by bad press and controversy over billionaire Elon Musk’s buyout.

A class action complaint filed on Nov. 3 in federal court in San Francisco argues that the layoffs, which were hastily conducted over email one week after Musk bought the company, violate WARN Act requirements around employee notification. The filing was initially reported by Bloomberg News. 

The named plaintiffs in the case are five former Twitter employees who were terminated this month as part of the company’s reported plans to reduce its headcount by around 3,700 employees, equivalent to approximately 50% of its workforce. 

Those legal issues may be headed off by the company’s decision to pay some employees through Jan. 4. Attorney Shannon Liss-Riordan told Bloomberg she filed the suit preemptively and said Musk “is making an effort to comply” with the law.

Although there are differences in federal and state WARN Act requirements, private companies like Twitter with at least 100-full time employees are required to provide 60-day advance written notice prior to conducting a mass layoff of 50 or more people within a 30-day period.  

“There doesn’t seem to be any doubt that federal and state WARN Act requirements are triggered by what’s going on now,” said John Mullan, a partner with employment law firm Rudy Exelrod Zieff & Lowe LLP.

Damages in WARN Act violation suits can be up to 60 days of back pay and benefits.

While there are exemptions to federal WARN Act requirements in the case of “unforeseeable business circumstances,” Mullan said “it’s hard to see how that exemption would apply in this circumstance.

Employees “cannot be required to waive their right to advance notice,” Mullan emphasized. 

Jennifer Redmond, a partner specializing in employment and labor law with Sheppard Mullin, said there are multiple ways to comply with WARN Act requirements, including keeping workers on paid administrative leave, providing pay and benefit in lieu of notice or some combination of the two. 

However, Mullan said there are also additional penalties for WARN Act violations that laid-off employees may be able to seek under the Labor Code Private Attorneys General Act, which allows aggrieved employees to file lawsuits to recover civil penalties on behalf of themselves.

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The cash-strapped company—Twitter is carrying around $13 billion in debt, thanks in part to the structure of Musk’s acquisition—can hardly afford more expensive legal fights. 

And it remains to be seen what impact the layoffs will have on Twitter’s operations amid fears that it’ll be understaffed in critical areas like content moderation. Some skittish advertisers are reportedly holding fire on Twitter ads during the management transition.

An employer who fails to give required notice in the case of a mass layoff can be subject to a civil penalty of up to $500 per day per employee. The Nov. 3 lawsuit, however, does not include these claims as of yet. 

Liss-Riordan, the attorney representing the plaintiffs in the federal complaint, has previously tangled with a Musk-led company before over similar issues.

Liss-Riordan filed suit against Tesla in federal court in Texas in September alleging WARN Act violations at the company during its own mass layoffs. According to the legal complaint, Tesla attempted to obtain releases from WARN Act claims from laid-off employees in exchange for a week or two of severance pay. That case was ordered into arbitration.

Video: A Timeline of Musk’s First Week Helming Twitter

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Kevin Truong can be reached at [email protected]


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