There has been a sharp rise in mass redundancies across the globe, in particular, amongst the tech giants such as Tik Tok, Klarna, Hello Fresh, Peloton, and others. In November 2022, Twitter, Meta, and Amazon entered the notorious list by announcing mass redundancies worldwide.
In this article, Associate Yulia Fedorenko and Partner Merrill April explore the cases of Twitter, Meta and Amazon in more detail and what employers need to take into consideration with regards to redundancies.
Since the recent acquisition of Twitter, a decision has been made to cut its workforce by almost 50% in a bid to reduce costs. Although the reason for the redundancies is potentially fair, the process followed by Twitter appears deliberately brutal and designed to shock. It is also legally unfair.
In the USA the Worker Adjustment and Retraining Notification Act (WARN) requires employers to provide 60 days’ notice if 50 or more workers are proposed to be made redundant in one establishment. In California, there is also a requirement to notify the Employment Development Department in advance of prospective mass redundancies. Twitter has provided no such notice and dismissed its US employees immediately following the receipt of the dismissal email on 4 November. In response, the now former employees brought a class action on the grounds of breach of the WARN, which is yet to unfold in California.
In Korea 30 employees were dismissed in a similar fashion, despite the law requiring 50 days’ notice along with the employer being able to demonstrate (if challenged) that reasonable and fair criteria for selection have been followed. It is not yet clear whether this decision will be challenged by the laid-off employees.
Despite the “corner-cutting” redundancy exercise around the globe, Twitter has been more careful with the EU and the UK employees. In the UK and Ireland, employees received a different email on 4 November saying that they are “at risk” of redundancy rather than saying that they are dismissed. The employees were required to nominate a representative for the forthcoming consultation (at least 45 days) following which dismissals may take place. There is also a requirement to notify the Secretary of State of the proposed redundancy if the proposal is to dismiss 100 or more employees within a 90-day period – failure to do so is a criminal offence, which may explain why Twitter has chosen a different approach here.
According to Mr Musk, the affected employees were offered 3 months’ severance pay “which is 50% more than legally required.” It seems that Mr Musk’s statement underpins the disturbing cultural shift of paying off employees rather than respecting their legal rights. The upside for the employer is likely to be speed.
The brutality of the sudden change creates mass insecurity, likely creating a culture of insecurity amongst those remaining. This is a gamble for employers, but controversially may be considered to have “paid off” as those who fear the same treatment and do not want to work hard and in an overtly profit-driven culture, leave voluntarily, saving the company money. There has been some evidence of this in Twitter, where its younger, highly skilled employees have only ever known a full-employment model and believe that they still have choice. If worldwide recession develops rapidly, it remains to be seen whether their confidence has been well-placed. Those who remain, have effectively self-elected to work relentlessly and no doubt hope to be rewarded by their hard work, which would also be a benefit to Twitter, provided those with the necessary skills for the future have been retained.
Meta and Amazon
Since the announcement on 8 November, Meta has already axed 11,000 of its global workforce. It is estimated that in the UK 650 and in Ireland 360 employees were be made redundant.
In the USA, according to Mark Zuckerberg, the affected employees have already received an offer equivalent to 16 weeks’ pay with an additional 2 weeks for every year worked and 6 months of health insurance, which may seem generous to some.
Amazon has also set its plan in motion and made redundant a number of roles in its devices and books business. It is expected that more dismissals will take place in early 2023 and that Amazon’s Alexa division will be affected the most due to its low profitability.
It is uncertain how these two tech giants dealt and will continue to deal with redundancies, albeit it is difficult to imagine that they will not follow Twitter’s or P&O examples in an attempt to reduce cost quickly.
It can be tempting to offer employees an enhanced package and “cut corners” in an attempt to deliver the bad news quickly and decisively, get the leavers out and rebuild with those employers wish to retain. However, this may well backfire and cause valued employees to leave and cause short-term skill shortages, reputational damage and undermine ESG principles, which the company may have previously invested in and espoused.
This may also cost employers more than it would have if a correct process has been followed from the start. Adequate planning and consistent implementation are likely to avoid legal issues and ensure that redundancies are done in a compassionate and sustainable manner.
If you are an employer and have any questions in relation to redundancies or would like to discuss further, please contact Associate Yulia Fedorenko or Partner Merrill April, both of whom specialise in employment and partnership law issues for multinational employers, senior executives, partnerships, LLPs, partners and LLP members.