Policy

What is the WARN Act? Here’s what to know about the Twitter lawsuit.

Some staffers who learned of their layoffs during Musk’s swift and massive cuts are suing under California’s WARN Act.

A woman standing outside a door with the sign, "State of California Employment Development Department"

A group of former Twitter employees filed a preemptive lawsuit on Thursday warning that Twitter could violate both the state and federal WARN Acts, and other suits may follow.

Photo: Brian van der Brug/Los Angeles Times via Getty Images

It’s an email no tech worker wants to read: “If your employment is impacted, you will receive a notification with next steps via your personal email.”

Some 7,500 Twitter employees received that warning in their inboxes on Thursday evening, with the mass layoff following swiftly after. Altogether, this round of layoffs is expected to cut the Twitter workforce in half. When you factor in the resulting drop in employee morale, the suspended advertising deals, and the mandatory return-to-office policy, Twitter could see even more employee losses in the coming weeks.

When California-based companies conduct mass layoffs, they’re supposed to provide 60 days’ notice to the government and employees ahead of time. Right now, it appears Elon Musk — who took control of the company just over one week ago — failed to do that. A group of former Twitter employees filed a preemptive lawsuit on Thursday warning that Twitter could violate both the state and federal WARN Acts, and other suits may follow.

But the law is a little more complicated than that. The lawsuit asked Twitter to provide the requisite notice or severance payment. Twitter reportedly told fired employees they could expect to receive details about severance agreements by next week. If those severance agreements end up providing more than 60 days’ worth of pay, then the WARN Act doesn’t offer much beyond that. The lawyer behind the lawsuit, Shannon Liss-Riordan, said on Friday that Musk had been “making an effort to comply” and clarified that the would-be class-action lawsuit was made “preemptively to make sure a repeat of that violation did not happen,” per Bloomberg.

What’s the WARN Act?

The California Worker Adjustment and Retraining Notification Act is a worker-friendly version of a federal statute that requires employers over a certain head count threshold to give the public a heads-up of at least 60 days when major cuts are coming. The idea is for employees to be able to move on with as little disruption as possible. In the Golden State, businesses employing more than 75 people full time and laying off at least 50 of them have to give notice. Musk’s layoffs reportedly came to more than 3,000 people, meaning it’s all but certain the WARN Act applies.

Did Musk violate the WARN Act?

The short answer is “we don’t know.” A spokesman for the California Employment Development Department — which should have received notice from Musk about the mass layoffs — told the New York Times that the agency didn’t receive notice from Twitter.

So things aren’t looking great for Musk, and a violation wouldn’t come as a surprise given his track record for filing government paperwork. Even for this deal, Musk failed to file the necessary SEC disclosures on time. In May, the SEC launched an investigation into the delayed filing, which likely allowed Musk to save around $143 million as he built up his stake in the company (though those savings now look meager against the $44 billion he paid for a company that is likely now worth much less than that.)

Earlier this year, Musk laid off workers at Tesla, which also sparked a lawsuit under the WARN Act. Employees claimed Musk asked them to sign severance agreements for two weeks of pay, far less than the 60 days of pay required under the WARN Act. In an interview at the Qatar Economic Forum, Musk described that lawsuit as having “no standing.”

What might Musk have to do if a court does find he violated the WARN Act?

For the most part, the punishment for bosses is that they have to give back pay for every day of notice that employees should have gotten but didn’t — so, 60 days’ worth of wages for no-warning layoffs, 59 days’ worth for a day of notice, etc.

In addition, the company is “liable for the cost of any benefits to which the employee would have been entitled had his or her employment not been lost,” according to the Society for Human Resource Management. That mostly means medical expenses that Twitter’s insurance plan would have covered for the ex-staffers.

Finally, Musk might have to pay $500 per day of violation, which likely isn’t too much for the world’s richest man.

Couldn’t Musk just give the workers a two-month severance package?

Mostly, yes. That seems to be pretty common, at least under the federal WARN Act. California tech, after all, has surprise layoffs all the time, particularly with the economic future looking so cloudy.

The problem may be that Musk — in one of his only communications with the company since he took it over last week and began dismissing leaders — said Twitter would be providing just a single month of severance. Reports came out on Thursday that company administrators were still finalizing potential severance agreements. The lawsuit is intended to sway Twitter into giving at least the 60 days guaranteed under the WARN Act.
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