Top ethical choices employers should make if conducting a mass lay-off, with key lessons from Amazon, Google, Microsoft and other tech giants.
The beginning of 2023 has seen another round of mass lay-offs across the technology and retail industries. Amazon has widened its job cuts from 10,000 to 18,000, Google’s parent company is set to cut 12,000 jobs worldwide, Microsoft will let go of 10,000 employees by the end of Q3, Spotify is cutting 6% of its workforce, and Wayfair, an online furniture company, has reduced its workforce by 1,750 people. In 2022 alone, big tech companies laid-off more than 150,000 employees.
The mass redundancies can be attributed to shifting spending habits amid the cost of living crisis, rampant global inflation increases, and soaring energy costs. As the domino-effect of large-scale redundancies plays out, many of the aforementioned tech and retail giants have faced criticism for the manner in which they have carried out the job cuts, from a lack of notice to potentially targeting female employees more than men.
With the global economy under continued strain as we enter 2023, other companies may have to consider the possibility of mass lay-offs. While this is always a difficult decision, employers can glean vital lessons from the criticisms posed against employers currently involved in mass lay-offs to handle such situations more ethically.
Provide notice and assess severance obligations
Some of the large tech companies have been criticised due to the abruptness of their termination notices. Some Google employees are claiming on work-related social media platform Linkedin that they found out they were made redundant when they were denied access to their work-related online networks, which is very damaging to the company’s reputation as an ethical and sensitive employer.
If a company is in a position where it must execute a mass lay-off, it should consider giving longer notice periods to give employees time to react to the news and create plans for their future beyond the company. Although in many US states employment is “at-will” and therefore notice is not always a requirement, it is ethically a good choice to give employees as much notice time as possible to absorb the difficult news and reflect on their options.
Furthermore, companies with a large number of employees must stay cognisant of legal notice provisions, or face lawsuits for failing to do so. In the US, Twitter was accused of violating the Worker Adjustment and Retraining Notification (WARN) Act 1989 when it dismissed nearly half the company’s total workforce in October 2022. The WARN Act requires workers to receive a 60-day notice prior to mass layoffs, which some employees allege was not provided. The WARN Act has seen recent developments, with the US state of New Jersey passing significant amendments to the Act in January 2023 to expand the capacity for employees to challenge mass lay-offs. The New Jersey WARN Act sees the state become the only one in the country to require severance pay for all employees who lose their jobs in a WARN Act event.
Severance obligations are being strengthened worldwide, with the Supreme Court of Brazil in June 2022 deciding that in order for a mass dismissal to be valid, an employer must be in open dialogue with worker unions. This decision necessitates that union intervention prior to dismissal is an essential procedural requirement for the mass dismissal of workers.
Any employer that is facing the reality of mass dismissals should stay aware of any severance obligations. Companies can facilitate collaboration between the HR and legal departments to ensure compliance and avoid any negative legal consequences.
Train managers in sensitive language
Twitter has been accused of a lack of sensitivity in communicating its most recent lay-offs. Employees were informed that they would receive an email the following day with their employment fate, either to their personal email address if they were being laid off, or to their work email if they were not. The email itself was sent without being addressed to individual employees and has been criticised for using an abrupt and blunt tone.
Company resources should be invested in developing managers' soft skills to be able to navigate dismissals appropriately and to encourage open, positive conversations with departing employees. Where possible, employers should carry out dismissals in person or via video call to deliver the news in a more personal and empathetic manner.
Additionally, mass dismissals can result in a drop in productivity and work quality amongst remaining staff as they struggle with heavier workloads and burnout. Employers should aim to be open and honest with remaining employees and aid them in finding new purpose in their job to reduce the negative impact on the companies’ remaining workforce.
Consider underrepresented groups
Female staff accounted for 47% of dismissals that occurred from September to December 2022, despite women accounting for less than a third of tech industry workers.
These statistics pose particular challenges in the technology industry, where gender imbalance is not a new phenomenon. A lack of diversity within a technology-oriented company can lead to the creation of technologies that exacerbate inequalities in society, for example bias within AI systems. Additionally, these statistics raise reputational risks for companies which could be seen as discriminatory towards certain underrepresented groups.
Compliance and HR departments of tech companies who execute mass job cuts should collaborate to monitor and review the demographic of those being let go of to ensure that these decisions do not undermine the integrity and quality of the organisation. If a large cut must take place, companies should seek to retain diversity in the remaining workforce.
Retain talent where possible
During the COVID-19 pandemic, some companies rushed to hire employees and build fulfillment infrastructure to meet the high demand. In an email to staff detailing the recent mass lay-offs, Alphabet’s chief executive stated that over the past two years, the company “hired for a different economic reality than the one we face today.” Similarly, Amazon’s workforce grew by 75% during the pandemic and the company’s CEO acknowledged that it “hired rapidly over the last several years” in the lay-off announcement. Wayfair intentionally built out fulfilment infrastructure during the pandemic, including increased logistics operations in Asia and Europe, to meet increased demand.
Companies can consider retaining and redirecting talent where possible. Creating opportunities for staff to move within the company preserves corporate knowledge and staff morale. For example, in 2013, AT&T concluded that 100,000 of its 240,000 employees were working in jobs that would no longer be relevant in a decade. Instead of letting these employees go and hiring new talent, AT&T decided to retrain the 100,000 workers by 2020, which increased company productivity.
Although it is unavoidable that companies will react to market fluctuations in their hiring process, it is important for companies to consider the long-term consequences of rapid expansion. Companies should aim to take stock of their operating cost and make long-term adjustment plans so they can avoid having to make quick judgements. As economic discontent is not set to end in the near future, employers should build economic uncertainty into corporate strategies to mitigate the ethical and reputational risks that come along with sudden mass lay-offs.