Elon Musk’s Twitter Causes Legal Headaches – The Hollywood Reporter
Elon Musk’s journey as owner of Twitter was rocky from the start. But, after seven months of negotiations and a lawsuit, he is now officially in charge of the microblogging platform and faces 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 a 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 is its $44 billion investment. Musk – who brought in outside backers including Oracle co-founder Larry Ellison, venture capital fund Sequoia Capital and cryptocurrency exchange Binance; convinced current shareholders Jack Dorsey and Prince Alwaleed bin Talal to retain their shares in the company; and took out more than $13 billion in loans to fund its takeover – says the company is hemorrhaging money.
His answer ? Ax half of the company’s employees. On the evening of November 3, Twitter staff were informed via an internal memo that layoffs were imminent. Living under the sword of Damocles, staff members waited to receive an email the next day that would reveal their status: some would be told their jobs were safe through their company accounts, while others would learn that they were fired via a message sent to a personal email address.
In the end, about half of the staff was made redundant, according to a tweet from Twitter’s head of security and integrity, Yoel Roth, who noted that his department had only been reduced by 15%. Other teams were almost or entirely gutted, including communications, curation, human rights, accessibility experience and one known as META (Machine Learning Ethics, Transparency and Accountability). In total, around 3,700 people have been affected worldwide. “When it comes to reducing the strength of Twitter, unfortunately, there is no other choice when the company is losing over $4 million a day,” Musk said. tweeted November 4.
Faegre Drinker labor and employment partner Gerald Hathaway said if Musk’s loss claim was accurate, something had to be done, but he hopes other cost-cutting measures have been explored. . “All of the firings are messy and all involve moving targets,” Hathaway says. “A poorly implemented layoff can cost a business more than it was expected to save. I suspect this layoff isn’t badly implemented, despite the unusual public attention given to it.
As soon as this internal memo was leaked, critics on Twitter and elsewhere on the internet immediately assumed that Musk had broken regulations regarding mass layoffs.
Under the federal WARN (Worker Adjustment Retraining Notification Act), companies with more than 100 employees are required to give notice before a layoff if it affects more than 500 people, sometimes less if it is a layoff. at least one-third of the workforce at a given site. Some states have stricter guidelines. In California, any company with 75 or more employees requires notice of termination of 50 or more employees within a 30-day period, regardless of the percentage of the workforce. In New York, the law covers private sector employers with 50 or more employees and WARN notices are required if the layoff affects 33% of the workforce (at least 25 employees) or 250 employees at a single site .
Screenshots of emails to staff quickly started making the rounds. Those who were terminated were told they would no longer be working, but “will remain employed by Twitter and will receive compensation and benefits until your separation date of January 4, 2023.” Another version of the message listed a separation date of February 2. These timelines are consistent with the 60 and 90 day notice periods required in California and New York, respectively. The terminated employees were also told other information about the departure, 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 email or direct message messages on Twitter, which isn’t entirely surprising since almost the communications team was reportedly fired. Musk’s DMs are not open.)
Hathaway remarks, “It is perfectly fine to place employees on paid leave during a WARN notice period. Compliance with WARN, even with 60 days paid leave, is much cheaper than non-compliance.
It is important to note that severance pay only comes into effect upon termination of employment, so any compensation or benefit received under such an offer should come after and in addition to payment and benefits received during the WARN Notice Period. This is also when employees should waive their claims against the company in exchange for this compensation.
Employment lawyers consulted by The Hollywood Reporter criticizing Musk’s approach, with one calling it “inhumane,” but it appears he met the demands. According to three WARN notices obtained from the California Department of Employment Development as of Nov. 4, the layoffs affected nearly 1,000 employees in the state. Meanwhile, 418 people in the New York office have been laid off, according to a WARN notice filed with labor officials there. (Reviews are embedded below.)
Prior to the emails being sent, on November 3, a group of five former Twitter employees filed a class action lawsuit alleging violations of federal and state WARN law. Three of them say that on Thursday they “were blocked on their Twitter accounts, which they understood to signal that they were fired”. There are no details on any of the complainants other than that he lives in Hawaii and works for Twitter’s corporate headquarters. The latest complainant, Emmanuel Cornet, alleges in the complaint that he was notified on November 1 that he was “terminated with immediate effect” and that he received no severance pay. In a blog post Cornet wrote the same day and titled “Bye Twitter,” he said he thought he was fired because of his “troublemaker” vibe. He referenced a meeting with HR over life cartoons he made on Twitter, and said the day he was released he shared internally a browser extension he had created to automatically download their Gmail conversations. Cornet also embedded what he says is a copy of his termination email, which states that his “recent behavior violated multiple policies.” The complaint characterizes his dismissal as “an early example of the intended mass dismissal”, rather than a dismissal for cause.
Their lawyer, Shannon Liss-Riordan, did not respond to a request for comment – but on November 8 an amended complaint was filed. There is still a WARN Act claim, which refers to Cornet and unnamed “other employees.” But, now, there are also breach of contract claims related to severance pay and remote work.
The April 25 merger agreement that Musk filed with the SEC stipulated that for a period of one year after the deal closes, Twitter would provide “severance and benefits…which are no less favorable ” than those offered before the sale. While it’s unclear whether the SEC could take action if the severance offers fail to meet that bar, Hathaway says “there was no contractual right created by such statements for the benefit of employees.”
Liss-Riordan argues that employees were third-party beneficiaries of the agreement, and that these “promises were communicated to employees orally (including in periodic ‘all hands’ meetings) and in writing by Twitter management, including including its former CEO, human resources staff and others.”
“For a number of employees who were terminated, Twitter gave 60 days notice and informed them that they would receive severance pay in the amount of one month’s pay…after their termination date. dismissal on January 4, 2023,” Liss-Riordan wrote in the amended complaint. “However, Twitter’s previous policy provided for greater severance and benefits for terminated employees. The previous policy provided for at least two months salary (or more, depending on the seniority of the employee), a bonus plan, the cash value of equity that would have been acquired within three months of the date of separation and a cash contribution for continued health care.
In that same Nov. 4 tweet that mentioned the financial losses, Musk said, “Everyone out was offered 3 months of severance, 50% more than the legal requirement.”
It’s unclear whether Musk was including WARN notice payments in this reference to three-month severance, but the complaint argues that he is effectively confusing the two.
Liss-Riordan asks the court to prevent Twitter from soliciting employees to sign separation agreements unless it informs them of their rights under WARN, as well as the existence of this lawsuit, and gives them its contact information. She is currently representing a different set of plaintiffs in a similar suit against Musk’s other company, Tesla. That fight was forced into arbitration in October. (The Hawaii-based employee appears to have survived the layoffs, but the amended complaint alleges that Musk revoked the option to work remotely and that the person missed the opportunity to seek new employment when the market was “more favorable” .)
In addition to litigation from those workers, Musk has drawn user ire over his bedside manner amid the platform’s layoffs and future plans.
“The way Musk/Twitter let people know they might be fired and then informed those who were fired that they had in fact been chosen to be fired, was extremely disrespectful to workers and how a job loss affects their lives,” says employment lawyer Ann Fromholz of The Fromholz Firm. “And as discussed all over social media, the teams Musk chose to eliminate seem to speak volumes about his priorities for the company going forward.”
In addition to the blue check debacle – which may or may not now include “official” labels it can’t be bought – he’s angry at his early cancellation of Donald Trump, his stance on parody accounts and indications that he will scale back moderation in the name of free speech. (Although he promised advertisers it wouldn’t become “a free-for-all hellscape.”)
Twitter power users have expressed dismay over whether to leave the platform and whether there is a viable alternative. While some are already gone, others are taking a wait-and-see approach, reluctantly conceding Musk’s point in a Nov. 8 tweet: “Twitter is the worst! But also the best.