Elon Musk is ready to start cleaning house at his latest $44 billion buy.
Late on Thursday (Nov. 3), Twitter notified employees that they’d receive an email by 9 am the following day letting them know whether they’re being let go or not, the Wall Street Journal reported. The note didn’t specify the extent of the cuts, but previous reports suggest almost 50% of the 7,500 headcount faces the Musk guillotine. More extreme estimates peg it at 75%.
“We recognize that this will impact a number of individuals who have made valuable contributions to Twitter, but this action is unfortunately necessary to ensure the company’s success moving forward,” the company wrote.
The same day as Twitter’s announcement, several tech companies announced downsizing efforts, signaling a broader trend in the industry. But layoffs aren’t the problem—it’s how Musk’s Twitter is doing them that are making things worse.
In his rush to trim the workforce, Musk may have ignored an important law—one that buys employees time to deal with being fired. Bloomberg reported that a class action lawsuit has already been filed against mass layoffs that violate the federal Worker Adjustment and Retraining Notification Act (WARN Act).
The WARN Act requires employers with more than 100 employees to provide 60 days’ advanced written notice prior to a mass layoff “affecting 50 or more employees at a single site of employment.”
The attorney who filed the complaint, Shannon Liss-Riordan, represented Tesla employees who were laid off in June in a lawsuit filed in Texas that alleged the company violated federal law for not providing advance notice of the redundancies. A judge in Austin sided with Tesla’s request for the case to be dealt with in closed-door arbitration rather than open court, but the former employees are pushing back.
Attorney Lisa Bloom also expressed interesting in a class action lawsuit against Twitter, and warned Musk in a tweet: “the storm is coming.”
As soon as he took his seat at the top, Musk ousted much of the top management. CEO Parag Agrawal, CFO Ned Segal, general counsel Sean Edgett and head of legal policy, trust and safety Vijaya Gadde, were all shown the door. Although Musk later denied it, reports claiming that he fired them before Nov. 1 to avoid hundreds of millions of dollars worth of severance payouts already did reputational damage.
If receiving Twitter’s ominous email wasn’t worrying enough, employees had started losing access to company Slack and email accounts, suggesting they were being laid off on Thursday night itself, the WSJ report said. Staff isn’t allowed in office either.
The official communication will also be done in a somewhat apathetic “slot-machine” style, with retained employees being notified on their official email, while fired ones get it on their personal email, according to NBC’s Ben Collins.
Firing Twitter workers has gone hand-in-hand with Musk filling roles with more than 50 Tesla engineers. Two Boring Company staff and one from his lesser-known neurotech firm Neuralink have also been brought over in the takeover.
The timing of the move—days before the US midterms, where misinformation will likely run rampant—raises alarm that the platform could indeed turn into a “free-for-all” hellscape that Musk vowed to avoid.
He’s also reportedly looking to save $1 billion in infrastructure costs which, as Reuters reported, could have the site go down at times of high traffic such as the midterm elections.
Even those who stay likely have a lot of adjusting to do to cater to Musk’s vision.
A number of Twitter executives have already left the company this past week.
Twitter’s C-suite has seen several other exits in the days since Musk took over and summarily dismissed CEO Parag Agrawal, who’d been in the job for less than a year since taking over from co-founder Jack Dorsey. Chief customer officer Sarah Personette, chief people and diversity officer Dalana Brand, vice president of engineering Nick Caldwell, and global sales vice president Jean-Philippe Maheu updated their Twitter bio or tweeted about quitting, while the departures of chief marketing officer Leslie Berland and head of product Jay Sullivan were reported in the New York Times.
Musk also dissolved Twitter’s board of directors, including Salesforce CEO Bret Taylor.
Cost-cutting may be the need of the hour at the company which posted a $270 billion loss in the quarter ended June 30, 2022. Especially as the microblogging platform has been struggling to keep users engaged. Its ”heavy tweeters”—someone who logs in to Twitter six or seven days a week and tweets about three to four times a week—account for less than 10% of monthly overall users but generate 90% of all tweets and half of global revenue.
Musk has multiple plans to improve margins, including reducing Twitter’s dependence on ad revenues by charging verified users a monthly fee for their blue tick. Layoffs are part of that blueprint of saving money.
Speaking at a Web Summit in Lisbon, Changpeng Zhao, chief executive and founder of Binance—the cryptocurrency exchange that has pumped $500 million into Musk’s takeover—said “a slimmer workforce would make more sense,” citing changes like the edit button moving too slowly.
Most of the attention is on internal restructuring, but Twitter is crumbling on the outside, too.
Advertisers are watching nervously. Following in General Motors’ footsteps, drugmaker Pfizer, food company General Mills, carmakers Volkswagen’s Audi, and Oreo maker Mondelez all pressed pause on ads.
Since the start of November, a string of other tech firms also laid off workers citing economic conditions and market downturns:
Nov. 2: Real estate tech firm Opendoor laid off 550 people, or 18% of its workforce. Startups Chime and Chargebee laid off around 150 workers each. Oracle laid off 200 employees in its cloud division, according to Business Insider.
Nov. 3: Stripe and ride-hailing firm Lyft both cut 14% of their workforces, at 1,000 and 700 respectively.
These are only the latest in a string of companies that have been reducing headcount in the recent past. Meta and Google have adopted quiet firing strategies, while others like Microsoft and Snap have laid off workers more directly. Last month, real estate platform Zillow and delivery startup Gopuff slashed hundreds of jobs to save on costs and up efficiency.
Nearly 17,000 people from 138 companies have been laid off since the start of this year.
What “good people at good companies” being axed hints at is a “really alarming macro story unfolding,” tweeted Michael Solana, vice president at San Francisco-based VC firm Founders Fund. “Anyone even remotely keyed into the economy is bracing for a long winter.”