International Business

The CEO of Amazon Explains the Reasoning Behind Layoffs as Outside, Unionized Warehouse Employees Demonstrate

The CEO of Amazon Explains the Reasoning Behind Layoffs as Outside, Unionized Warehouse Employees Demonstrate

After going on a big recruiting spree for much of the month, Amazon CEO Andy Jassy warned on Wednesday (November 30, 2022) that an “uncertain” environment forced the e-commerce giant to press forward with rare and extensive layoffs.

“We had the lens of a very uncertain economic environment, as well as our having hired very aggressively over the last several years,” Jassy said in an interview at the New York Times DealBook summit on Wednesday. “We just felt like we needed to streamline our costs.”

The comments were made as part of Jassy’s first interview following Amazon’s (AMZN) announcement earlier this month that it has started terminating corporate employees, with intentions to do so through the beginning of next year. Although it has not announced a number, the company is apparently aiming to lay off up to 10,000 workers.

More than most internet companies, Amazon saw a startling pandemic surge as more people switched their shopping during the health crisis to online channels. It has recently reversed course and started laying off staff as it deals with a change in demand, as well as concerns about rising inflation and a potential recession.

“A lot has happened in the last few years that I’m not sure people anticipated,” Jassy said. “You just look in 2020, our retail business grew 39% year-over-year, at a $245 billion annual run rate, which is unprecedented, and it forced us to make decisions in that time to spend a lot more money and to go much faster in building infrastructure than we ever imagined we would.”

We had the lens of a very uncertain economic environment, as well as our having hired very aggressively over the last several years. We just felt like we needed to streamline our costs.

Amazon CEO Andy Jassy

“We built a physical fulfillment center footprint over 25 years that we doubled in 24 months,” Jassy said.

Even so, Jassy said he thinks the team “made the right decision” regarding its infrastructure build out. Regarding the hiring spree, Jassy said he now looks at is as a “lesson for everyone.”

“I don’t necessarily think it was the wrong thing to have been doubling down, because we were growing so well and we had so many ideas that we thought were good for customers and good for the business, but I think it’s a good lesson, I think, for everybody,” Jassy said.

“When you’re hiring, even when things are going really well, that it’s good to think about if there’s some kind of sudden change, even one that you just have a little bit of a hard time imagining. Would you like the incremental headcount that you’re adding at that time, or do you want to be a little bit more conservative?”

Legal battle with union is ‘far from over’

Amazon warehouse employees who assisted in establishing the company’s first US labor union at a Staten Island site gathered in the rain outside the venue as Jassy spoke to express their displeasure with their top executive’s visit to New York.

Amazon has so far declined to legally recognize the grassroots worker organization known as the Amazon Labor Union or participate in negotiations, despite the historic union victory in April. The National Labor Relations Board (NLRB) was used by the employer to vehemently oppose the workers’ triumph.

While the NLRB battle indicates the labor union is on the cusp of being certified, Jassy suggested Amazon’s legal battle with the worker group isn’t done yet. He said there “were a lot of irregularities in that vote,” which is why the company filed objections with the NLRB. (Amazon’s objections were previously rejected by an NLRB hearing officer.)

Jassy noted that employees did not choose to unionize in either of the last two Amazon union elections, and that Amazon prefers to interact directly with fulfillment center employees as opposed to going through unions.

“In my own opinion on where we are with that legal process is that we’re far from over with it,” Jassy said. “I think that it’s going to work its way through the NLRB, it’s probably unlikely the NLRB is going to rule against itself, and that has a real chance to end up in federal courts.”

In an interview with CNN Business ahead of Jassy’s remarks, Amazon Labor Union President Chris Smalls slammed that Jassy “even had the audacity to feel comfortable to come to New York City knowing that we haven’t negotiated anything yet.”

“We definitely want to take this opportunity to let him know that the workers are waiting and we are ready to negotiate our first contract,” he added of the demonstration, which he called a “welcoming party” for Jassy.

Some laid-off Amazon employees who had corporate positions have gotten in touch with Smalls and expressed interest in union protections, according to Smalls.

“I tell them you may have good salary, you may have good perks, you may got good stocks and benefits, obviously better than warehouse workers, but at the end of the day, you’re still an at-will employee,” Smalls said.

“I explained to them, the one building that can’t be touched right now by mass layoffs is JFK8 Staten Island,” he said. “I encourage them to do what they have to do, if that means form a union, so be it, we support it.”