Elon Musk, CEO of both SpaceX and Tesla, has recently added ‘owner and CEO of Twitter’ to his CV, after the $44 billion takeover of the social network.
What has happened since then is quite extraordinary. Following the takeover at the end of October it appears Musk has cut approximately 3,700 jobs which is about half of the Twitter workforce. But it’s the way that it has been done that is grabbing headlines and saturating social media.
There are reports of all Twitter offices being closed, staff discovering they’ve been let go by not being able to login to company software and those remaining, being given a deadline to agree to Musk’s new terms of a “hardcore” culture and being expected to work “long hours at high intensity” or resign.
Are these actions completely unreasonable? We asked our Head of the Employment team here at Square One Law, Jean-Pierre van Zyl (JP), what he makes of Musk’s recent handling of Twitter staff.
JP: “Whilst headline grabbing, we need to be aware that employment law and practice in the United States (which then differs from state to state) is very different than in the UK. This approach would be unlawful in the UK as employees generally have much more protection.”
Is it normal then in countries like the US to make redundancies in this way especially after a takeover? Would we ever see anything like this in the UK?
JP: “It’s quite common for new owners to review and often reshape their executives and reduce numbers where necessary. Twitter is reportedly losing $4 million a day so the commercial case appears to warrant a closer look at the shape and overheads of the business, even though the approach and tone being adopted are harsh. In the UK, there is protection but as we saw recently with P&O Ferries, some employers may choose to ignore this protection in favour of saving costs, though they would be liable for significant sums of compensation.”
Twitter is not the only large tech company that has been in the news over the past few weeks regarding large scale redundancies. Meta (Facebook and Instagram) announced 11,000; Amazon 10,000, and Shopify with approximately 1,000 layoffs. What is happening here?
JP: “The companies mentioned all massively recruited during the pandemic. Whilst we were all adjusting to new ways to live and work, technology played a large role and these tech first companies had to hire new staff to keep up with demand and growth.
It was very much an employee’s market. Unemployment was at record lows, whilst vacancies were at record highs, so employees had more choice to select new jobs based on things like flexibility, salary, engagement and culture.
Now we have rapidly rising inflation, rising overheads, tighter margins and reduced turnover and so we’re now starting to see a shift in behaviour. The number of vacancies are reducing and employees are quite understandably choosing to stay in more secure jobs. And as we’ve seen, Twitter is not an isolated case as the labour market adjusts to external forces.”
Why do you think Twitter is making the headlines more, especially if Meta and Amazon are making such large redundancies too?
JP: “Good question. Musk courts his own publicity. Dismissing and threatening to dismiss employees of a social media platform would predictably create a storm of activity particularly about such an emotive subject. He’s had a good look at the business during the protracted due diligence and it would appear he believes the business should be operated on a different footing. That’s his prerogative, just as it would be here in the UK. I would expect Musk has been advised on process, but whether the tone and approach he has elected to take will turn employees, advertisers and customers off waits to be seen. The court of public opinion will ultimately decide whether his behaviour is acceptable, that’s the fascinating aspect in my view.”
What can we expect in the UK now that we’re in a recession?
JP: “Collective redundancies are becoming more common. We are already seeing several businesses revisiting their working practices and ‘right-sizing’ for expected tough times. Whilst the burden of redundancies always falls on middle management and those occupying less senior roles, senior managers and executives are not immune. The ability to quickly make sense of the changing landscape is at a premium for management teams. Those business leaders unable to do so are also becoming increasingly vulnerable.”
What would your advice be in circumstances such as these?
JP: “Twitter was reportedly losing $4 million a day before Musk’s takeover. Unless that’s deliberate then something absolutely had to be done to ensure survival of the company. It’s always advisable to take advice early so that all aspects can be considered and planned for. It’s not unusual to trim in some areas and recruit in others. However, the way Musk has handled this seems very unsympathetic and whether he has damaged Twitter as an employer brand remains to be seen. Musk has already began recruiting so I guess we’ll see.”
What is the effect on the company of a large cull in staff? Well Twitter is already under the watchful eye of the US government’s antitrust and consumer protection agency (at least until 2042) due to previous security breaches. The large-scale layoffs reportedly mean that top privacy and compliance staff are no longer in post leaving Twitter quite vulnerable. And this week the entire Brussels office has closed reportedly meaning that there are currently no staff ensuring that the EU’s landmark Digital Services Act is being adhered to. These are just two fairly serious consequences of losing key staff.
Another by-product of recent actions is that hate speech and disinformation are rumoured to have spiked on the platform since the takeover and with reports of approximately one third of key advertisers abandoning the platform and other high-profile users quitting on an almost daily basis. Time will tell how well Twitter survives this current chaos and whether Musk really is a genius business magnate or on this occasion an out of touch ‘Space Karen’ as he has been dubbed by his critics.