Tesla's severance packages sent to some of the 14,000 workers laid off this week were "incorrectly low," CEO Elon Musk informed staff in an email obtained by CNBC on Wednesday.
As Tesla undergoes reorganization, Musk has noticed that some severance packages are too low and apologized for the mistake, stating that the issue is being corrected immediately.
Series of Layoffs for Tesla's Next Phase of Growth
This week's layoffs occurred as the company gears up for its next phase of growth, highlighting the necessity to trim costs and enhance productivity. Moreover, EV makers are confronting escalating competition from domestic manufacturers in China and declining sales.
READ ALSO: Tesla Grappling with Sales Decline, to Layoff 10% Workforce Amid Intensifying EV Price War
According to five laid-off workers who spoke to BI, some employees were offered two months of severance, and as of Wednesday night, other workers had yet to receive further information regarding severance packages.
Based on the Worker Adjustment and Retraining Notification (WARN) Act, companies with over 100 employees must provide a minimum of sixty days' pay if a 60-day notice period has not been served to laid-off workers before mass job cuts. Consequently, Tesla's CEO, Elon Musk, sent an all-hands email on Sunday night, revealing that the automaker's workforce had been reduced by 10%. Some employees only discovered upon arriving for work on Monday, with some being informed by security that if their ID badges did not grant access, they were no longer employed.
The Ironic Incident of Incorrect Severance Packages
The timing of the incorrect severance packages is ironic, given that the company had published a proxy filing just hours before on Wednesday, seeking shareholders' reapproval of Musk's staggering $56 billion pay package, which Delaware courts described as "an unfathomable sum" when they invalidated his pay package earlier this year.
In the proxy filing, Tesla board chair Robyn Denholm wrote to shareholders, stating that due to the Delaware Court's scrutiny of their decision, Elon has not received payment for any of his work for Tesla over the past six years despite contributing to significant growth and shareholder value. She highlighted that most shareholders had agreed to approve this package in 2018.
Tesla's Ongoing Challenges That Call For Reorganization
Tesla's mass layoffs coincide with its sales slowdown and increasing competition from domestic manufacturers in China, serving as its most crucial market outside the U.S.
Tesla also experienced the departure of several senior executives. Drew Baglino, who had been with the company for 18 years and was most recently appointed head of powertrain and electrical engineering, announced his difficult decision to leave on Monday, along with Rohan Patel, the vice president of public policy and business development.
Musk also grapples with lawsuits from four former executives of Twitter, now X, who are suing him for $128 million in unpaid severance. The plaintiffs, including former CEO Parag Agrawal, former chief financial officer Ned Segal, former legal chief Vijaya Gadde, and former general counsel Sean Edgett, were terminated following Musk's takeover of Twitter in 2022.
