Workplace

Netflix’s layoffs reveal a larger diversity challenge in tech

Netflix just laid off 150 full-time employees and a number of agency contractors. Many of them were the company’s most marginalized employees.

Netflix profiles

It quickly became clear that many of the laid-off contractors possessed marginalized identities.

Illustration: Christopher T. Fong/Protocol

After Netflix’s first round of layoffs, there was a brief period of relief for the contractors who ran Netflix’s audience-oriented social media channels, like Strong Black Lead, Most and Con Todo. But the calm didn’t last.

Last week, Netflix laid off 150 full-time employees and a number of agency contractors. The customary #opentowork posts flooded LinkedIn, many coming from impacted members of Netflix’s talent and recruiting teams. A number of laid-off social media contractors also took to Twitter to share the news. It quickly became clear that similar to the layoffs at Tudum, Netflix’s entertainment site, many of the affected contractors possessed marginalized identities. The channels they ran focused on Black, LGBTQ+, Latinx and Asian audiences, among others.

Protocol identified at least 40 people from marginalized backgrounds who lost their jobs in the latest round of cuts. Netflix would not comment on the exact number of laid-off workers who were from marginalized communities but it did say that among Netflix's full-time workers, representation of women and POC remained the same.

The news comes on the tail of a rough year for Netflix. Its latest earnings report revealed the loss of 200,000 subscribers globally during the first quarter of 2022, and predicted the loss of 2 million more. Stock prices promptly dropped, greatly impacting employees who opted for majority option-based compensation. Not to mention the downward trend of the economy more broadly.

Netflix isn’t alone in cutting costs by trimming its workforce right now, and it makes sense that contracted workers would be some of the first to go. But the company’s decision to pull resources from projects aimed at underrepresented audiences run by a number of underrepresented workers has led to a backlash. The move represents a wider trend in layoffs: Marginalized workers and initiatives are often deemed non-essential and are the first to go when a company is pushed to make cuts.

“It is really frustrating to feel like those communities are the expendable ones,” said a former contractor, who was granted anonymity to protect her severance agreement with Netflix.

A unique opportunity pulled away

The Netflix gig was a dream come true for many of the journalists and creatives laid off last week. Similar to warehouse workers who were let go by Peloton in February, they enjoyed the job security and benefits of working for a tech company: an unfamiliar feeling in both the media and manufacturing industries. Some earned six-figure salaries. The contract workers Protocol spoke with worked full-time for Netflix, but were not technically Netflix employees: They worked for a creative agency called Made by Fabric. Fabric gave the employees health care and other benefits, and they were allowed to freelance for other outlets, but because of Fabric’s high salary and their full-time status, they didn’t feel compelled to. Fabric’s website is up, but its domain and LinkedIn page no longer work. It’s unclear if the agency still exists, as all of the contractors who worked with Netflix were laid off. Fabric did not respond to Protocol’s requests for comment.

Netflix declined to specify its relationship with Fabric, or whether the agency was created by Netflix. The workers Protocol spoke with said it seemed like Netflix was Fabric’s only client. One social media contractor said everyone was made to switch from management services company PRO Unlimited to Fabric in 2021. The setup was confusing.

“I heard a lot of Netflix employees in particular gripe about the setup of us working for an agency,” the former contractor said. “We had a Netflix employee that we had to report to, but we also had bosses at the agency. There was this constant struggle between who gives us assignments.” This type of conflict isn’t unique to Netflix.

That power struggle didn’t matter too much when it came to the actual work. Both contractors described the environment as incredibly supportive and affirming. “It was the most diverse workplace I’ve ever been in,” one of them said. They were passionate about the work, most of which had to do with reaching Netflix viewers who shared their identities. But their contract status inherently made them more vulnerable to layoffs.

“So many of these people are already at a disadvantage for so many reasons: given their identities, given just the lack of inherent privilege,” a former contractor said.

Myles Worthington, Netflix’s former head of Global Audiences, was in charge of these social media teams. According to LinkedIn, he left the company a few weeks ago and has publicly voiced his support for those who were laid off. Worthington also tweeted, “Never will I build something so substantial for someone else. Never, ever again,” which appears to reference his work building out the diverse set of audience teams.

Netflix told Protocol the layoffs were “primarily driven by business needs rather than individual performance, which makes them especially tough as none of us want to say goodbye to such great colleagues.” A spokesperson said the company will continue to invest in the affinity social media channels, albeit bringing most of the work in-house.

Netflix was one of the first tech companies to publish diversity data of its full-time employees back in 2013, and has continued to make its data available each year. Women represent over half of its global workforce, and employees from marginalized racial backgrounds account for 50.5% of Netflix's U.S. workforce. But Black U.S. employees still account for a smaller percentage, representing 10.7% as of 2021. In comparison to Netflix’s most recent numbers, some tech companies still have a ways to go in terms of reaching gender parity, and representation of Black employees remains low. Women still represent only 44.7% of Twitter’s global workforce, and just 29.7% of Microsoft's.

In 2020, Netflix pledged to help build more economic opportunity in the Black community and, in 2021, moved 2% of its cash holdings — about $100 million — into Black-owned banks and other Black-led financial institutions. It's also made headlines for making major investments in HBCUs over the past two years. More recently, Netflix CEO Reed Hastings and his wife Patty Quillin donated $10 million to fund scholarships at Tougaloo College.

But the company also came under fire for hosting Dave Chappelle’s transphobic comedy special, and then terminating the employee who led a related company walkout last October. GLAAD also called out the platform on Tuesday for hosting Ricky Gervais’ comedy special, which contains anti-trans jokes. And the recent loss of so many underrepresented workers at once doesn’t inspire confidence in Netflix’s DEI efforts.

“My former employer didn’t just decimate Tudum,” tweeted Evette Dionne, who had been an editorial and publishing manager at Tudum. “Layoffs are also targeting social channels designed to bring marginalized viewers into the fold (Strong Black Lead, Golden, Most, Con Todo, etc.) There’s a deeper story here. I hope we’re all paying attention.”

Representative of a larger phenomenon

Star Carter, co-founder and chief operating officer at DEI tech company Kanarys, said layoffs frequently disproportionately affect women and people of color because companies often don’t have diversity spread throughout the organizations. Oftentimes, more inclusive representation is concentrated in the entry level and what are considered to be “non-essential” roles.

Non-essential roles tend to include HR, administrative and content-focused jobs, in which women and people of color frequently work. Because of this, Carter said, DEI has to be at the center when leaders think about layoffs.

Working with contract agencies can be inherently problematic when it comes to diversity. According to a recent report by TechEquity Collaborative, “contract and temp workers are more likely to be Black, Indigenous, Latinx, Asian, women, and nonbinary people than those hired in the direct workforce.” This leads to what the report calls “occupational segregation.”

Carter agreed. “A lot of times you will get diversity in your contractors, and so if you have just a flat decision to cut contractors … that's where you're going to see an issue, and you might want to reevaluate your criteria, because you are having a very disparate impact on a specific demographic,” she said.

Think about DEI from the outset

For companies that are concerned they might soon encounter the same fate as Netflix, Thanh Nguyen, CEO and co-founder of the compensation benchmarking startup OpenComp, suggested that now is a good time to get back to “operating fundamentals.” Meaning: hiring plan re-evaluation, burn and runway costing and sticking to your compensation ranges. It’s best to plan for the worst before the worst — in this case, significant layoffs — actually occurs, he told Protocol.

“That likely means pausing non-essential hiring, assessing vendors, raising the bar for what’s considered acceptable spend and sticking to pay ranges instead of giving yourself a lot of wiggle room like we’ve seen in the Great Reshuffle,” said Nguyen.

In his eyes, some layoffs could be prevented by compensation planning. He suggested tech companies and startups think strategically about compensation early on and reassess often. Over the past two years, many companies upped compensation offers to win over top talent in the midst of what remains a tight talent market. Overspending on talent puts companies at risk when the markets dip.

And when it comes to maintaining a diverse and inclusive work environment during potential layoffs, experts say strategic planning is just as imperative.

Carter spoke with Protocol more broadly about ways companies can take diversity and inclusion into consideration during this time. She broke the best practices down into a few steps.

Step one is to be clear and objective about what your criteria is for layoffs. After you’ve listed the proposed people to be let go based on your criteria, step two is to analyze that list for any disproportionate effects on certain demographic groups within your company. If so, this is an opportunity to go back to the drawing board and reevaluate.

“It's a balancing act between step one and step two,” said Carter. Contract workers should be considered in this evaluation as well, she said.

And if you must go the route of laying off employees, she recommends making sure employees have a quality severance package and providing transitional career services if at all possible. While Carter hasn’t seen as many companies offer career transition help, she views it as an effective tool for former and current employees alike.

“And again, it builds that trust with those who remain, because people talk,” she said. “It helps to create that trust and have people know, ‘Wow, they helped my friends and colleagues through this tough layoff with respect and gave them a severance and provided transitional career services.’ So it's something I think organizations can do to help with that messaging and soften the blow because like I said, layoffs are inevitable. It's just making sure you do it in the correct way.”

One of the Netflix contractors told Protocol she was grateful for her time there, given the competitive benefits and invigorating work. But she’s wary of the company’s promises and dedication to underrepresented workers and viewers.

“If you’re going to launch something, you better pour resources into it,” she said. “Or at the end of the day, you’re just stringing people along.”

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