Amazon and Coinbase announce mass redundancies​

By Jake Rickman
Image credit - Sundry Photography / Shutterstock.com​

What do you need to know this week?

Two high-profile companies have announced a wave of substantial redundancies, reflecting depressed economic conditions on both sides of the Atlantic in the new year.

Amazon announced yesterday it is closing three warehouses across the UK in a decision that will impact 1,200 employees in Hertfordshire, South Yorkshire, and Scotland. This follows on from an announcement made last week to cull 18,000 jobs among its corporate workforce, which, as the FT reports, largely consists of HR and e-commerce staff.

Separately, NYC-based crypto exchange Coinbase will make 1,000 employees redundant across the business group, with UK employees likely to be affected. This move forms part of a wider restructuring, which began in June 2022 and is the second round of lay-offs, following a first round that saw 1,100 staff — or 20% of its workforce at that point — sacked.

Why is this important for your interviews?

When business groups face shrinking profit margins, their leaders either need to find more revenue or cut expenses. In recession or recession-adjacent conditions, finding more revenue is often not in the cards, which makes cost-cutting the only real viable option. As workforce costs are frequently among the most costly expenses, unfortunately, widespread redundancies are often among the first steps a company takes when facing substantial headwinds.

Given Coinbase’s position within the crypto-space, which has suffered appallingly the past nine months, the announcement is perhaps not so surprising. However, Amazon’s decision speaks to broader and more fundamental market conditions, especially in the UK. Namely, as the cost-of-living crisis eats into consumers’ wallets, demand for the online retailer’s goods has begun to fall, having reached all-time highs during the pandemic when lockdowns led to a spike in online sales.

How is this topic relevant to law firms?

Widespread redundancies require close consultation with employment lawyers to ensure the proposal does not impinge on workers’ rights to the point that it becomes a liability to the business. Amazon has stated they will offer affected employees in the UK alternative employment, though this is unlikely to be a solution for all the affected workers.

Many employers offer employees redundancy packages in excess of their bare obligations under the law in exchange for employees waiving any potential claim against them. While this presents a high upfront cost, it ensures that the risk of future litigation is minimised while ensuring long-term costs are reduced. A case in point is Coinbase’s restructuring: as the Evening Standard reports, out of the expected $163m cost of restructuring, redundancy compensation alone costs $95m, or nearly 60% of the total.