Elon Musk's Twitter Faces Lawsuit for Mass Layoffs: An 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 terminate up to 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 claiming the layoffs are imminent and will violate US and California laws if employees are not 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 mass layoffs as those affecting at least 500 employees during a 30-day period, or at least 50 employees if layoffs impact at least one-third of a company's workforce. Employers can provide workers with 60 days of severance pay in lieu of giving notice.

What are the penalties for violating the WARN Act?

An employer found to have violated the WARN Act can be ordered to give laid-off workers 60 days of back pay. The law also imposes penalties of $500 (nearly Rs. 41,000) per violation per day. Comparable laws in California and other states impose similar penalties.

What has Twitter been accused of?

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

The lawsuit claims the layoffs violate the WARN Act and a similar California law. The plaintiffs say they are concerned that Twitter will ask workers targeted for layoffs to sign releases waiving their ability to sue in exchange for modest severance pay.

Have other Elon Musk-run companies been sued under the WARN Act?

Tesla was sued in Texas federal court in June for allegedly violating the WARN Act through an abrupt nationwide purge of its workforce, including 500 layoffs at a factory in Sparks, Nevada. The law firm behind that case, Boston-based Lichten & Liss-Riordan, also represents the Twitter workers who sued on Thursday. The firm did not immediately respond to a request for comment. Tesla has said it was merely "right-sizing" by firing poorly performing workers and not engaging in layoffs that required advance notice.

Last month, a federal judge said Tesla workers must pursue their claims in private arbitration rather than court. The same issue could arise in the lawsuit against Twitter, as more than half of private-sector US workers have signed agreements to arbitrate employment-related legal disputes.

Has there been an increase in WARN Act litigation?

Employers faced a spike in lawsuits brought under the WARN Act and state laws during the COVID-19 pandemic, as many businesses abruptly shuttered or terminated many of their employees. Enterprise Rent-A-Car, Hertz Corp, restaurant chain Hooters and Florida hotel operator Rosen Hotels and Resorts all settled WARN Act lawsuits over pandemic-related layoffs. Rosen settled claims by 3,600 workers for $2.3 million (nearly Rs. 18 crore) and Enterprise agreed to pay $175,000 (nearly Rs. 1.5 crore) to nearly 1,000 workers. Hertz and Hooters paid undisclosed sums.

© Thomson Reuters 2022

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