Employment in the Time of Elon: Twitter and Tesla’s Mass Layoffs

On October 28, 2022, Elon Musk formally acquired and became CEO of Twitter, Inc.[1] Two months later, the company now faces multiple class-action lawsuits, dozens of demands for arbitration, and constant rumors that the platform will shut down.[2]  How did the new ownership go so bad so quick? 

Musk originally offered to buy Twitter in April 2022, but publicly held off from completing the purchase for many months.[3]  The main reason for the delay stemmed from Musk’s original offer of $54.20 a share, a low valuation at the time.[4] As months passed, the stock fluctuated and Musk’s offer for Twitter became overvalued.[5]  When Musk tried to get out of his original offer, a Delaware Chancery Court held him to the original price, forcing him to complete the roughly $44 billion acquisition and bear nearly $13 billion in debt.[6]  Armed with an overvalued asset and billions of dollars of debt, Musk entered his tenure as “Chief Twit” with a focus on cutting costs, starting with reducing labor.[7]  

Rumors quickly spread that up to 75% of the workforce would be laid off, specifically those employees who did not live up to Musk’s version of value within the company.[8]  According to Musk, the biggest problem with Twitter was that “[t]here seem[ed] to be 10 people ‘managing’ for every one person coding.”[9]  Musk aimed to fix this “problem” by keeping only the employees focused on improving the source code of the app and laying off employees not essential to his version of value.  Musk claimed the layoffs were the only option for a business that found itself “losing over $4M/day.”[10]  While Musk did not live up to the rumored 75% reduction in employees, by the end of his first week in charge, the company laid off roughly half of its employees—and on Thursday, November 3, Musk’s Twitter received its first class-action lawsuit.[11]

Five former employees filed the lawsuit, arguing that the company’s mass layoff violated both the federal Worker Adjustment and Retraining Notification (WARN) Act and California’s Labor Code § 1401.[12]  The federal WARN Act requires a company to provide written notice to employees sixty days before any mass layoff, which the WARN Act defines as a layoff of at least 33% of its workforce or 500 employees.[13]   California’s Labor Code defines a “mass layoff” as fifty or more employees and requires the same written notice as the federal WARN Act.[14]  With both statutes requiring written notice sixty days prior to a layoff of at least 50-500 employees, Twitter seemingly violated both statutes by laying off 3,700 employees without written notice.[15]

Instead of the required sixty-day written notice, Twitter emailed all employees on November 3 and informed them that the company would be “reducing [its] global workforce” the very next day.[16]  The email outlined the layoff process, explaining that if employees received an email on their work account, they kept their job; but if they received an email on their personal email account, they lost their job.[17]  Adding to the stress of less than a day’s notice before a mass layoff, many employees discovered that they were automatically logged out of their Slack and Twitter accounts, a sign of an impending layoff.[18]  With little to no notice given, affected employees seem to make a strong argument that Twitter violated the WARN Act. 

However, Musk’s history with the WARN Act could lead to trouble for Twitter’s former employees.  In the Fall of 2022, another company Musk is CEO of defended itself against its own WARN Act violation lawsuit.[19]  In the class action suit Lynch v. Tesla, multiple employees sued Tesla for failure to provide written notice before laying off 500 employees from the Tesla Gigafactory in Nevada.[20]  Ultimately, the Texas court held that because the employees signed an arbitration clause in their employment contract, whether Tesla violated the WARN Act was subject to arbitration.[21]

The court’s decision to arbitrate Lynch v. Tesla occurred on September 26, 2022, a little over a month before the filing of the class action suit against Twitter.[22]  Due to the close timeline of Tesla’s lawsuit and the mass layoffs at Twitter, it seems that Musk’s legal team advised him on how a court will handle a WARN Act violation in the wake of a mass layoff.  In fact, Twitter filed a motion to compel arbitration of the claims through individual arbitration, rather than a class action suit.[23]  More importantly, Twitter stated its belief that it did not violate the WARN Act at all.[24]

When the layoffs occurred on November 4, affected employees received an email outlining the next steps in the layoff process, including an offer for three months of severance pay.[25]  Publicly confirming this offer, Musk tweeted that the “3 months of severance . . . is 50% more than legally required.”[26]  However, severance pay is not federally required, nor is it a legal requirement in California, so it is unclear what “legal requirement” Musk is referring to in his tweet.[27]  While it is possible that Twitter’s employment contracts require severance pay, it is also possible that the “legal requirement” Musk referred to is part of the company’s WARN Act obligations.  Based on this theory, Twitter will likely argue that written notice occurred on November 4 and the layoffs will not take effect until after the three months of severance pay.  Therefore, while the employees no longer conduct work for Twitter, they are employees with more than sixty days’ notice of a future layoff. 

Shannon Liss-Riordan, the plaintiffs’ lawyer in both Lynch v. Tesla and in the current suit against Twitter, suspects that this theory will be Twitter’s legal argument.[28]  Liss-Riordan claims that Musk “learned something” from the Tesla suit, but he still nevertheless violated the WARN Act with the layoffs at Twitter.[29]  While Tesla only offered one to two weeks of severance pay to employees affected by layoffs, Twitter offered three months of severance pay.[30]  Tesla’s severance pay clearly could not replace sixty days of advance notice; however, because Twitter’s severance pay was greater than Tesla’s severance offer, Liss-Riordan believes that Musk is “paying in place of notice.”[31]  This practice means that by paying an employee for sixty days post layoff, the employer provided the affected employee with notice as required by the WARN Act.  However, Liss-Riordan argues that this practice still violates the WARN Act because the affected employees are blindsided without the required written notice.[32]  The U.S. Department of Labor acknowledges both points of views, noting that “pay and benefits in place of a notice is a possible option” but an employer who uses this practice “technically has violated WARN,” as the Act “makes no provision for any alternative” to sixty days written notice.[33]  It is now up to a California court to determine if the practice is an acceptable option or if Twitter will have to face back pay and other damages for violating the WARN Act.

Liss-Riordan is moving forward with the suit, but it seems that the suit is preemptive and more of a negotiation tactic than anything else.[34]  The question is, what will the employees be negotiating for?  Affected employees will receive severance pay and full benefits.[35]  Twitter is now a private company, so it is impossible for the affected employees to ask for stock.[36]   However, it is likely that these employees will use the WARN Act violation as leverage to receive more severance pay or a return offer.   

The day after the mass layoff, rumors again started to circulate about employment at Twitter—this time, about bringing employees back.[37]  According to disclosed Slack messages, Twitter executives asked remaining employees to make lists of laid-off employees who should be re-hired.[38]  It seems that in an effort to cut costs, Musk rashly fired employees without realizing the labor required to create his new version of Twitter.  If affected employees are asked to return to work, the class action may help them receive higher pay and a better title on return. But, will employees want to return?

Twitter’s work culture is changing.  Musk’s first official email to employees noted Twitter’s “dire economic condition” and announced that the company is cutting employee perks like monthly rest and relaxation days.[39] Additionally, like Musk’s other companies Tesla and SpaceX, all employees must work at least forty hours a week in office, without an option for remote work.[40]  Days after his first email, Musk emailed employees an ultimatum: agree to stay at “Twitter 2.0” and work “long hours at high intensity,” or receive “three months of severance.”[41]  Many employees resigned in the wake of the ultimatum, leading users to fear that the app would shut down without enough employees to service it.[42]  The ultimatum also prompted a new lawsuit against Twitter, which claims that Twitter is discriminating against disabled employees by forcing employees to work “long hours at high intensity” in office without any reasonable accommodations.[43] 

The status of employment at Twitter is unclear and evolving every day.  Affected employees may want to return to work out of fear of finding a new job—especially due to mass layoffs at other tech companies such as Meta—or they may refuse to return because of the markedly changed work culture.[44]  The mass layoffs could do exactly what Musk wanted —cut costs and retain only the employees who will build the new version of Twitter Musk envisions— or Musk’s rash and reckless layoffs could cost the company more in negotiations and rehiring those laid off and later found essential to Twitter’s development.  It is also unclear how the lawsuits will play out: will the court find that Twitter violated the WARN Act, or will “pay in place of notice” be a legally acceptable standard for mass layoffs?  Will the discrimination suit cause Musk to accommodate his employees’ needs or will “Twitter 2.0” continue to be an “extremely hardcore” and “high intensity” environment?  There are many unanswered questions of what employment at Twitter will be in the future and only time, and Musk himself, can provide the answers.

[1] Alex Heath, Twitter Is Planning to Start Charging Soon for Verification, The Verge (Oct. 30, 2022, 5:52 PM),https://www.theverge.com/2022/10/30/23431931/twitter-paid-verification-elon-musk-blue-monthly-subscription.

[2] Clare Duffy, Twitter Hit by Legal Complaints from 100 Employees Following Musk’s Layoffs, CNN (Dec. 21, 2022, 5:12 PM), https://www.cnn.com/2022/12/21/tech/twitter-employees-arbitration/index.html.

[3] Max Zahn, A Timeline of Elon Musk’s Tumultuous Twitter Acquisition, ABC News (Nov. 11, 2022, 11:21 AM),https://abcnews.go.com/Business/timeline-elon-musks-tumultuous-twitter-acquisition-attempt/story?id=86611191#:~:text=On%20Oct.,2022%20in%20New%20York%20City.

[4] The LightShed Podcast, Episode 130: October 28, 2022, LightShed Partners, at 3:09 (Oct. 28, 2022), https://open.spotify.com/episode/7z3dmZo4kRcq0pmHxJvLtU.

[5] Id.

[6] Lauren Hirsch, Elon Musk Seems to Answer to No One. Except for a Judge in Delaware, N.Y. Times, https://www.nytimes.com/2022/10/26/technology/musk-twitter-delaware-judge-mccormick.html (last updated Oct. 27, 2022).

[7] Heath, supra note 1.

[8] Faiz Siddiqui, Elon Musk Begins Mass Layoffs at Twitter, Wash. Post, https://www.washingtonpost.com/technology/2022/11/03/elon-musk-twitter-layoffs/ (last updated Nov. 4, 2022, 10:50 AM).

[9] Elon Musk (@elonmusk), Twitter (Oct. 30, 2022, 4:50 AM), https://twitter.com/elonmusk/status/1586686935518498816.

[10] Elon Musk (@elonmusk), Twitter (Nov. 4, 2022, 4:14 PM), https://twitter.com/elonmusk/status/1588671155766194176.

[11] Todd Spangler, Elon Musk’s Twitter to Make Massive Layoffs Friday Via Email, Variety (Nov. 3, 2022, 6:34 PM), https://variety.com/2022/digital/news/twitter-layoffs-via-email-elon-musk-1235423032/#recipient_hashed=e8bb289c7121ce03dda9855cb8ee753198079c2510f39275ff87187f08f7b03d&recipient_salt=4157d2b01c900a109e18df6022375f8e0ad572e81e64334f6d1ee37237b67175.

[12] Sarah Perez & Ivan Mehta, Twitter Sued in Class Action Lawsuit Over Mass Layoffs Without Proper Legal Notice, TechCrunch (Nov. 4, 2022, 6:50 AM), https://techcrunch.com/2022/11/04/twitter-faces-a-class-action-lawsuit-over-mass-employee-layoffs-with-proper-legal-notice/.

[13] Worker Adjustment and Retraining Notification, 29 U.S.C. § 2101.

[14] Cal. Lab. Code § 1400.5(d) (2023); see also Cal. Lab Code §1401(a)(2) (2023) (“An employer may not order a mass layoff . . . unless the employer gives written notice . . . [to t]he Employment Development Department, the local workforce investment board, and the chief elected official of each city and county government within which the . . .  mass layoff occurs.”)

[15] Perez & Mehta, supra note 12.

[16] Spangler, supra note 11.

[17] Id.

[18] Cornet v. Twitter, Inc., No. 3:22-cv-6857 (9th Cir. Filed Nov. 3, 2022).

[19] Perez & Mehta, supra note 12.

[20] Lynch v. Tesla, Inc., No. 1:22-cv-00597-RP, 2022 WL 4295295 (W.D. Tex. Sept. 16, 2022).

[21] Id.

[22] Mike Pearl, Twitter Layoff Lawsuit Is Aimed at Preventing a Repeat of Tesla Layoffs, Mashable (Nov. 5, 2022) https://mashable.com/article/elon-twitter-lawsuit-layoffs.

[23] Robert Iafolla, Twitter Asks Court to Push Layoff Class Action into Arbitration, Bloomberg Law (Nov. 22, 2022, 6:59 AM), https://news.bloomberglaw.com/class-action/twitter-asks-court-to-push-layoff-class-action-into-arbitration?context=article-related.

[24] Daniel Wiessner, Twitter Seeks Dismissal of Disability Bias Lawsuit Over Job Cuts, Reuters (Dec. 22, 2022, 2:04 PM), https://www.reuters.com/legal/twitter-seeks-dismissal-disability-bias-lawsuit-over-job-cuts-2022-12-22/.

[25] Phil Helsel, Twitter Sued Over Short-Notice Layoffs as Elon Musk’s Takeover Rocks Company, NBC News,https://www.nbcnews.com/business/business-news/twitter-sued-layoffs-days-elon-musk-purchase-rcna55619 (Nov. 4, 2022, 9:35 AM).

[26] Musk, supra note 10.

[27] Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001, et. seq.

[28] Pearl, supra note 22.

[29] Id.

[30] Id.

[31] Id.

[32] Id.

[33] eLaws Advisors, WARN Advisor, U.S. Dept. of labor, https://webapps.dol.gov/elaws/eta/warn/faqs.asp (last visited Nov. 21, 2022).

[34] Pearl, supra note 22.

[35] Helsel, supra note 25.

[36] Rob Wile, Here’s What Happens to Twitter’s Stock Now That It’s a Private Company, NBC News (Oct. 28, 2022, 8:35 AM), https://www.nbcnews.com/business/business-news/what-happens-to-twitter-stock-now-going-private-rcna54531.

[37] Ivan Mehta, After Laying Off Half of Its Staff, Twitter Might Be Asking Some Employees to Come Back, TechCrunch (Nov. 7, 2022, 1:54 AM),https://techcrunch.com/2022/11/07/after-laying-off-half-of-its-staff-twitter-might-be-asking-some-employees-to-come-back/.

[38] Id.

[39] Kate Conger, Ryan Mac & Mike Isaac, ‘Economic Picture Ahead Is Dire,’ Elon Musk Tells Twitter Employees, N.Y. Times (Nov. 10, 2022), https://www.nytimes.com/2022/11/10/technology/elon-musk-twitter-employees.html.

[40] Id.

[41] Lora Kolodny, Elon Musk Says Twitter Employees Must Commit to ‘Hardcore’ Culture by 5 p.m. Eastern Time, CNBC (Nov. 17, 2022, 3:41 PM), https://www.cnbc.com/2022/11/17/elon-musk-sends-ultimatum-to-twitter-employees-read-the-faqs.html.

[42] Clare Mulroy, #TwitterMigration? How to Download Your Data from Twitter if You’re Making the Switch, USA Today, https://www.usatoday.com/story/tech/2022/11/18/how-to-download-account-data-twitter/10726966002/ (last updated Dec. 2, 2022, 5:39 PM).

[43] Matthew Loh, Disabled Twitter Employees Resigned Because They Felt They Couldn’t Keep Up with Elon Musk’s ‘Hardcore’ Drive, Discrimination Lawsuit Says, Bus. Insider (Nov. 17, 2022, 11:32 PM), https://www.businessinsider.com/disabled-twitter-workers-felt-forced-quit-elon-musk-discrimination-lawsuit-2022-11; Amended Complaint & Demand for Jury Trial, Borodaenko v Twitter, Inc. No. 4:22-cv-7226, (N.D. Cal. filed Dec. 07, 2022); but see Motion to Dismiss, Borodaenko v Twitter, Inc. No 4:22-cv-7226 (N.D. Cal. filed Dec. 21, 2022) (claiming the company’s actions were not directed at disabled employees).

[44] Gerrit de Vynck, Layoff Spree in Silicon Valley Spells End of an Era for Big Tech, Wash. Posthttps://www.washingtonpost.com/technology/2022/11/12/tech-facebook-twitter-layoffs-dotcom/ (last updated Nov. 14, 2022, 11:30 AM).