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New #TwitterLayoffs lawsuit may impact recruitment and ad sales in the long run

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By Kendra Barnett | Senior Reporter

November 4, 2022 | 8 min read

The lawsuit follows a slew of high-level resignations, user backlash and ad spend cuts that have rocked Twitter in the days since billionaire Elon Musk took the reins.

Twitter building

Twitter faces a new lawsuit over mass layoffs / Adobe Stock

Editor’s note: Since publishing, The Drum has learned that affected Twitter employees will remain on the payroll until the first week of January 2023, though laid-off employees were immediately locked out of all Twitter systems including their email accounts. The attorney who filed the lawsuit Thursday, Shannon Liss-Riordan, told Bloomberg that Twitter “is making an effort to comply” with the law. We will be following this story as it develops.

In the latest chapter of Elon Musk’s turbulent Twitter takeover, the company has been slapped with a class-action lawsuit for allegedly violating a federal law that requires employers to give 60 days’ notice of mass layoffs.

Five plaintiffs in the lawsuit – filed Thursday night – are current or former Twitter employees. One of the plaintiffs, according to court documents, was let go effective Tuesday.

“We filed this lawsuit tonight in an attempt to make sure that employees are aware that they should not sign away their rights and that they have an avenue for pursuing their rights,” Shannon Liss-Riordan, the attorney who filed the suit, told Bloomberg.

The news comes mere hours after an internal memo was reportedly shared with Twitter employees, explaining that layoffs were happening on Friday November 4 “in an effort to place Twitter on a healthy path.” Recipients were told they’d find out their fate via email on Friday morning.

By this morning, hashtags including #TwitterLayoffs, #OneTeam and #LoveWhereYouWorked were trending amid the upheaval.

It’s been widely reported that Musk, whose acquisition of the platform was completed last week, plans to slash around half of the company’s 7,500-person staff.

Experts believe Musk’s approach to laying off staff will ultimately hurt him. “Keeping the company in a constant state of uncertainty doesn’t bode well for Musk’s plans for the future of Twitter,” says Jasmine Enberg, a principal analyst at Insider Intelligence’s eMarketer specializing in social media. “Fear isn’t a great long-term motivator for the employees who remain to execute Musk’s vision, and Musk needs all hands on deck to navigate through this period of change.”

Plus, some predict that employees who remain are likely to disengage. “The people who don’t get cut are going to start looking for new opportunities, not do their best work and ultimately leave for something else,” says Zaven Nahapetyan, co-founder of web3 content platform Niche. “Job security is more important than ever for tech workers right now, given the current economic climate, so people will be looking for work that feels stable and secure.”

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Not to mention that the drama may not bode well for future talent acquisition efforts. “The challenge going forward will be how to attract and retain new talent with the way Musk has treated a large population of Twitter employees, many of whom have been there since the beginning,” says Paul Roberts, chief executive and founder of adtech company Kubient. “The tech community is relatively small ... and the fact that Musk has very publicly decided to fire people a few days before stock vesting and bonuses are due will not quickly be forgotten.”

Meanwhile, Musk’s intentions of loosening the reins on content moderation – which many fear will invite an influx of hate speech and misinformation on Twitter – has caused a stir among users and advertisers. The hashtag #TwitterMigration has been trending as users move to other platforms such as microblogging site Mastodon.

Brands – whose advertising spend accounts for the majority of Twitter’s revenue stream – are pulling back too. Data from e-commerce marketing firm MikMak reveals that Twitter has witnessed a 42% drop in advertising traffic for brands over the last week. Major organizations including General Motors, Audi, Volkswagen and Pfizer have paused their advertising on the platform.

A wave of executive resignations, paired with Musk’s plans to charge users $8 a month for verification, has only spooked advertisers more.

Layoffs – with the added layer of a class-action lawsuit – aren’t likely to persuade brands to come running back anytime soon, says Enberg. “In the near-term, Musk’s management style isn’t going to help soothe advertisers’ concerns,” she says. “Internal stability is an important consideration for advertisers when they’re allocating their budgets, and Musk’s erratic behavior and seeming indifference toward employees and the law is another reason on a long list of why advertisers are choosing to pull ads from the platform.”

And ultimately, Musk needs them more than they need him. “Twitter is not an essential platform for most advertisers, so it’s already easier to justify pulling or pausing ads on the platform than on more important platforms like Meta or Google,” says Enberg. In fact, Insider Intelligence data indicates that Twitter will account for just 0.8% of worldwide digital ad revenues this year.

“Tack on very valid concerns about brand safety and a user exodus,” Enberg says, “and it’s a relatively easy and painless decision for Twitter’s advertisers to cut their spending there.”

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