Sarah Holder is a staff writer at CityLab covering local policy, housing, labor, and technology.
The co-working giant is letting 2,400 employees go and outsourcing 1,000 cleaning and facilities jobs as part of a company-wide belt-tightening.
After more than three years of working as a cleaner at a New York branch of the co-working office space WeWork, Jane was given a choice last week: Either accept the company’s offer to transfer her employment to an outside contracting outfit, or she would lose her job.
“WeWork’s really not giving us any other option: It’s either you take it or leave it,” she said. (She asked CityLab not to use her name, because she didn’t want to risk retaliation from her employer.) “You either take the job offer or you’re going to stay without a job.”
Jane is one of the 1,000 cleaning, pantry, and facilities operations employees in the U.S. and Canada that were notified this month that WeWork had entered into a partnership with JLL, a real estate services contracting company. In a November 11 email obtained by CityLab, Arik Benzino, the We Company’s “CWeO” for the U.S. and Canada, told the group they were being offered jobs with JLL or “one of its trusted partners.” Their old WeWork jobs would be discontinued. This new arrangement, the email said, “will help us more consistently manage our spaces and provide an even better experience for our employees and our members.”
Most employees were given until Monday, November 18 to accept the change, or until Saturday, November 23 if they were working in California. A WeWork spokesperson said on Tuesday morning that the majority of cleaners had taken the offer. Their proposed start date under this new management will be Monday, December 9.
WeWork says it’s been mulling this transition into a contractor model since the spring, but the announcement comes as the company is reeling from a spectacular series of setbacks. After the We Company cancelled its IPO this fall due to major investor skepticism at its history of revenue loss, co-founder and CEO Adam Neumann was forced out with a $1.7 billion exit package. Softbank, the Japanese investment company that once heavily funded the We Company, has since taken over the business, and has pledged to stabilize it. This week, the company began the process of laying off 2,400 other employees across its global offices, in what appears to be a cost-cutting effort.
Many technology companies in Silicon Valley and beyond infamously employ shadow armies of subcontractors who work full-time without the perks and benefits as traditional employees—at Google, for example, this group makes up more than half of the company’s entire workforce. Using contractors instead of full employees is a common cost-saving measure, says Laura Padin, a senior staff attorney with the National Employment Law Project. “Instead of hiring employees, they have a bunch of different contractors compete against each other for a contract,” she said. “It incentivizes cutting corners and engaging in illegal practices like wage theft, so that is the worry here.”
WeWork employees are not unionized, which means that though the 2,400 employees who are being laid off will receive severance pay and continued benefits, there are few protections in place for employees who are being outsourced. But as bad press accumulated around Neumann and the company’s business model—and a fear of firing loomed—an internal organizing body that calls itself the WeWorkers Coalition has emerged to advocate for We Company employees, including cleaners and building staff.
“Thousands of us will be laid off in the upcoming weeks. But we want our time here to have meant something. We don’t want to be defined by the scandals, the corruption, and the greed exhibited by the company’s leadership,” the coalition wrote in a letter published in The New York Times. “We want to leave behind a legacy that represents the true character and intentions of WeWork employees.”
In a list of demands shared on Twitter, the WeWorkers Coalition asked WeWork to extend the staff’s offer letter deadline to December 1, provide up to three months of severance pay, guarantee eligibility for raises in 2020, and “complete release of any non-compete and non-solicitation obligations with WeWork.” They’ve also requested a change to WeWork’s 401(k) plan’s “last day rules,” which would mean that they’d only receive their match if they’re employed on the last day of the year.
A spokesperson for WeWork said she would not comment on whether the company has been in contact with the WeWorkers Coalition or would field any of their demands. But on the 401(k) front, there seems to have been progress: “Those who are currently enrolled in WeWork’s 401(k) program will receive a one-time lump sum payment equal to what they would have received as a 401(k) match for this year, less applicable taxes and deductions,” the spokesperson said. “This payment will be included in their last WeWork paycheck.”
Labor experts say WeWork’s move to shift cleaners into a contractor model is not illegal. But outsourcing does have potentially harmful ramifications, Padin says. “This is not an uncommon thing to do, but the issue is this type of outsourcing … allows companies to avoid their legal duties to workers and degrade working conditions,” she said. “It allows contracting companies [like WeWork] to essentially avoid liability for violations of workplace laws even as they benefit from and have the right to control the work itself.”
WeWork has assured the workers that are migrating to JLL that these are not layoffs, and that not much will change under the new contract: All workers’ salaries will stay the same, “and your current shift assignment will not change for the time being,” Benzino wrote. “You’ll leverage your current skills in your new role, which will align with your current role at WeWork.”
Despite this assurance, Jane, who’s a member of the WeWorkers Coalition, says she and her peers are worried. Their contracts did not include an exact description of the work they’d be doing in their new jobs, so they fear their roles may transform. Though she won’t get a pay cut, having a new employer means that previously scheduled raises may be delayed: WeWork employees are typically given raises every April; in JLL’s offer letter, many were told that they won’t be eligible for a pay bump until 2021. When concerns over the pay discrepancy were raised, JLL sent out a clarifying email to some employees. The message, reviewed by CityLab, said that workers will be “eligible for consideration for a merit increase in 2020,” but that they “do not guarantee any compensation increases.”
If WeWork employees choose not to accept the transfer, they’re not eligible for severance pay, because they’re hourly workers. And because WeWork is providing an opportunity for continued employment, the company told Jane that those who stop working will also be ineligible for state unemployment benefits.
Michelle Evermore, a senior policy analyst with NLEP, confirms that WeWork is probably right. “Because they’re working in the same place for the same raise, and everyone’s guaranteed a new placement … that’s going to disqualify them for [unemployment insurance] in almost any state,” she said. “And if it doesn’t, it’s an indication that WeWork is going to challenge benefits.” Though the company itself wouldn’t be on the hook to pay the unemployment packages, companies that lay off more workers have to pay more in unemployment taxes—a measure that discourages random layoffs, but also drives companies to fight unemployment claims.
Evermore and Padin both said that, in some states, WeWork might be in violation of the Worker Adjustment and Retraining (WARN) Act, which protects employees from unexpected mass layoffs. In New York, where WeWork is the largest office tenant, the act requires all private businesses with more than 50 full-time workers to provide 90 days notice before they lay off 33 percent of the workers at the site, or 250 or more full-time workers. CityLab reached out to the New York Department of Labor but has not yet received a response; if a company is found to be violating the WARN Act, it has to pay severance to all workers affected.
Before the company’s recent troubles, Jane says she was always happy to go into work, and her Manhattan WeWork building was always “full of life.” She thought she’d be able to grow with the company. Now, she reports, the mood is more grim, and she dreads having to start over with a new manager.
“The company talks about being ‘we’ and ‘equally’ and that we’re ‘all together’—that we are all the same people,” said Jane, who was given until Friday to decide whether to accept the outsourcing offer. (She says she probably will.) “But when it came to a decision like this, how come we didn’t get offered severance packages? We were supposed to be all together as one big family.”