Elon Musk’s Twitter Sues for Mass Layoffs: Explainer on WARN Act

Twitter has begun laying off employees under its new owner, Elon Musk. The San Francisco-based social media giant is expected to lay off about 3,700 people – half of its workforce – on Friday, according to internal plans reviewed by Reuters this week. Twitter is already facing a proposed class action that says layoffs are imminent and would violate US and California laws if workers aren’t given advance notice or severance pay.

What does US law require?

The Federal Worker Adjustment and Retraining Notification (WARN) Act requires businesses with 100 or more employees to provide 60 days’ notice before engaging in mass layoffs. The law defines a mass layoff as one that affects at least 500 workers within a 30-day period, or at least 50 workers if the layoff affects at least one-third of the company’s workforce. Employers can offer employees 60 days’ notice in lieu of notice.

What are the penalties for violating the WARN Act?

An employer found to have violated WARN can be ordered to provide laid-off employees with 60 days of pay. The law also imposes fines of $500 (roughly Rs. 41,000) for each violation per day. Comparable laws in California and other states impose similar penalties.

What is Twitter accused of?

A lawsuit filed in San Francisco federal court late Thursday says Twitter locked out employees from their accounts on Thursday, signaling that they will soon lose their jobs. One of the five reported plaintiffs, based in California, says she was terminated on Nov. 1 without notice or severance pay. It was not clear whether Twitter is paying the workers who lost their jobs. Twitter did not immediately respond to a request for comment.

The lawsuit claims the layoffs violate the WARN Act and California’s equivalent law. The plaintiffs said they were concerned that Twitter would ask employees targeted for layoffs to sign letters waiving their right to sue in exchange for less severance pay.

Are other companies run by Elon Musk bound under the WARN Act?

Tesla was sued in Texas federal court in June for allegedly violating the WARN Act by laying off workers across the country, including laying off 500 people at its factory in Sparks, Nevada. The law firm behind that lawsuit, Boston-based Lichten & Liss-Riordan, is representing the Twitter employees who sued on Thursday. The company did not immediately respond to a request for comment. Tesla said it was “the right balance” by firing underperforming workers and not engaging in layoffs that require advance notice.

Last month, a federal judge said Tesla workers must pursue their claims through private arbitration instead of court. A similar issue may arise in the case against Twitter, as more than half of US private sector workers have signed agreements to resolve employment-related legal disputes.

Has there been an increase in WARN Act litigation?

Employers have faced a surge in lawsuits brought under the WARN Act and state laws during the COVID-19 crisis, as many businesses have closed or furloughed many of their workers. Enterprise Rent-A-Car, Hertz Corp, Hooters restaurants and Florida hotel operator Rosen Hotels and Resorts have all settled WARN Act lawsuits over pandemic-related layoffs. Rosen settled the claims of 3,600 workers for $2.3 million (about Rs. 18 crore) and Enterprise agreed to pay $175,000 (about Rs. 1.5 crore) to nearly 1,000 workers. Hertz and Hooters paid an undisclosed amount.

© Thomson Reuters 2022

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