After two former Tesla employees filed a lawsuit alleging that the auto company had violated US labor regulations by allegedly conducting mass layoffs, Elon Musk explained on Tuesday, June 21, how many company workers would only lose their jobs.
GRUENHEIDE, GERMANY - MARCH 22: Tesla CEO Elon Musk attends the official opening of the new Tesla electric car manufacturing plant on March 22, 2022 near Gruenheide, Germany.
Tesla's Layoffs
As reported first by CNBC, the billionaire said at a Bloomberg event on Tuesday that Tesla would slash its employment by 10% in the coming three months but also increase the number of hourly workers at the same time.
Reuters reported earlier this month that Tesla CEO Elon Musk intended to reduce 10% of the company's labor force, citing an email message in which Musk apparently expressed his pessimism about the economy.
But according to an email acquired by CNBC, Musk clarified that Tesla would only reduce salaried employment by 10% and raise hourly staffing. The layoffs will affect about 3.5 percent of the company's total employees.
Musk also said on Tuesday that the exact number of workers to be laid off is not "super material" and added that salaried workers only comprise two-thirds of the company's workers.
The CEO also noted that the number of both salaried and hourly workers could increase after a year.
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The Lawsuit
Two former Tesla employees filed a lawsuit on Sunday, saying that the corporation broke federal regulations surrounding bulk layoffs.
The lawsuit alleges more than 500 workers have been sacked at the automaker's Nevada factory. The workers who filed the case request class-action status for any former Tesla employees who were unemployed without warning in May or June across the United States.
At least 20 Tesla staff claimed that they were laid off without notice this month of June, according to Reuters. The complainants said that the automaker has merely advised that their unemployment "would be effective immediately."
Employers are obligated to give 60 days' notice of a mass layoff or plant shutdown, according to the Worker Adjustment and Retraining Notification Act.
However, Musk downplayed the suit's significance claiming that it was just a tiny lawsuit that was "of minor consequence," noting that any news that accompanies Tesla's name automatically becomes a big headline.
Tesla's handling of its employees has recently been in hot waters. Musk has instructed the automaker's staff that they must work at least 40 hours each week or they will be fired.
Elon Musk's Pessimism
Musk decided to lay off some of its workers due to his "bad feeling" about the economy.
Despite recent predictions of a recession, demand for Tesla cars and other electric vehicles has remained strong, and many of the classic indicators of a slowdown, such as increased dealer inventories in the United States, have yet to materialize.
Tesla has struggled to restart production at its Shanghai factory after the recent COVID-19 lockdowns in China caused significant setbacks.
Musk's bearish prognosis matches that of JPMorgan Chase & Co (JPM.N) CEO Jamie Dimon and Goldman Sachs President John Waldron.
Inflation in the United States is reaching 40-year highs, rising Americans' living costs, while the Federal Reserve has the difficult task of damping demand enough to avoid a recession.
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Written by Joaquin Victor Tacla
