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

What does US law require?

The federal Worker Adjustment and Retraining Notification Act (WARN) requires businesses with 100 or more employees to provide 60 days notice before beginning mass layoffs. The law defines mass layoffs as those affecting at least 500 employees in a 30-day period, or at least 50 employees if the layoffs affect at least one-third of the company’s workforce. Employers can provide workers’ compensation for 60 days in lieu of 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 fines of $500 (almost Rs 41,000) per violation per day. Comparable laws in California and other states impose similar penalties.

What is Twitter accused of?

The lawsuit, filed in San Francisco federal court late Thursday, alleges that Twitter blocked its employees’ accounts on Thursday, signaling that they would soon lose their jobs. One of the five named plaintiffs, who is based in California, says he was terminated Nov. 1 without notice or compensation. It was not clear whether Twitter is paying compensation to workers who lose their jobs. Twitter did not immediately respond to a request for comment.

The suit claims the layoffs violate the WARN Act and a similar law in California. The plaintiffs say they are concerned that Twitter will ask workers targeted for layoffs to sign waivers giving up the ability to sue in exchange for modest compensation.

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

Tesla was sued in Texas federal court in June for allegedly violating the WARN Act through a sudden nationwide workforce purge, including 500 layoffs at a factory in Sparks, Nevada. The law firm behind the case, Boston-based Lichten & Liss-Riordan, also represents the Twitter employees who filed the lawsuit Thursday. The firm did not immediately respond to a request for comment. Tesla said it was simply “right-sizing” by firing underperforming workers and not committing to layoffs that require advance notice.

Last month, a federal judge said Tesla workers should pursue their claims in private arbitration, not in court. The same issue could arise in the lawsuit against Twitter, as more than half of US private sector workers have signed agreements to arbitrate employment-related legal disputes.

Is there an increase in WARN Act litigation?

Employers faced a surge in lawsuits filed under the WARN Act and state laws during the COVID-19 pandemic as many businesses suddenly closed or laid off many of their employees. Enterprise Rent-A-Car, Hertz Corp, restaurant chain Hooters and Florida hotel operator Rosen Hotels and Resorts have settled WARN Act lawsuits over pandemic-related layoffs. Rosen settled claims of 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 amounts.

© Thomson Reuters 2022

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