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Why Did Tesla Fire Hundreds of Employees?

Hundreds of former Tesla employees found themselves jobless this month, but the company was insistent that the cuts were not layoffs. "As with any company, especially one of over 33,000 employees, performance reviews also occasionally result in employee departures," a Tesla spokesperson told the Mercury News. "Tesla is continuing to grow and hire new employees around the world."

But that's not how several current and former employees describe the cuts, claiming those fired had little or no warning, with some being notified by email or phone and told not to come into work the next day. While Tesla may be trying to save face by not using the word "layoff," it could also be dodging certain employment laws.

Duty to WARN

The Worker Adjustment and Retraining Notification (WARN) Act requires any employer with more than 100 employees to provide at 60-days notice before mass layoffs. WARN defines mass layoffs as either affecting more than 500 employees at a single site or at least 50 employees that comprise over 33 percent of the total employees for a single site.

Initial reports put the dismissals, largely from Tesla's motor division, between 400 to 700 employees, though a manager told CNBC the total number fired is more than 700 at this point. The company employs around 10,000 workers at its Fremont factory. Tesla also did not report the terminations to California's Employment Development Department, which the law requires in cases of layoffs of more than 50 employees.

Cuts and Compensation

"Like all companies," a spokesperson asserted, "Tesla conducts an annual performance review during which a manager and employee discuss the results that were achieved, as well as how those results were achieved, during the performance period. This includes both constructive feedback and recognition of top performers with additional compensation and equity awards, as well as promotions in many cases."

Still, firing hundreds of employees all at once signals that either Tesla is masking layoffs, or the company is masking quite a few hiring mistakes.

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