Meta hit with lawsuit alleging AI targeted sick workers for layoffs

Meta is facing a lawsuit accusing the company of leaning on AI to decide who got cut in this year’s mass layoffs, and the plaintiffs say the process discriminated against workers with medical issues.

What the lawsuit alleges

Twenty-six employees of Meta Platforms have filed a novel lawsuit accusing the tech giant of using AI-powered software that disproportionately targeted people with disabilities or who took medical leave in selecting workers for mass layoffs.

The complaint, filed in Oakland, California federal court late Monday, says the company relied on factors such as productivity and AI token usage when it slashed thousands of jobs earlier this year, disadvantaging people who missed work because of medical conditions or to care for family members.

The plaintiffs, who were notified in May that their jobs would be eliminated starting on July 22, are seeking a preliminary ruling from the court blocking Meta from completing the layoffs while they pursue their claims in private arbitration. The workers say Meta’s agreements require employees to arbitrate workplace disputes individually, but do not apply to requests for temporary relief.

Meta’s response

Meta has denied the allegations, with a spokesperson telling Reuters that workforce management and organizational decisions were and are made by people, not AI.

The 26 plaintiffs, who filed anonymously, are accusing Meta of violating federal and state laws that ban discrimination or retaliation against workers who have disabilities, take medical leave or are pregnant. They also claim that Meta failed to test its AI systems for bias in violation of recently adopted California and New York City laws.

Do you want to see how to make more plays? Do you want to find gains yourself?

Unusual Whales helps you find market opportunities through our market tide, historical options flow, GEX, and much, much more.

Create a free account here to start conquering the market with Unusual Whales.

The broader layoff backdrop

Meta laid off 10% of its global workforce in May, or nearly 8,000 people, and was planning more job cuts later this year, Reuters had reported. CEO Mark Zuckerberg has since said that he does not expect any more company-wide layoffs this year.

The changes are part of a far-reaching overhaul as the company increases its AI investments and centers AI agents in both its product offerings and its approach to work internally.

Why traders should care

Beyond the headline risk, this case could set a template for how courts treat AI-assisted personnel decisions, an issue that touches nearly every large-cap tech employer that has leaned on automation to trim headcount.

A preliminary injunction blocking the July 22 cuts, even temporarily, would be a notable procedural win for the plaintiffs and could invite copycat suits across the sector. Watch for follow-on coverage in other market news.

Options market and stocks to watch

META: Watch for headline-driven flow around the July 22 layoff date and any court decision on the preliminary injunction request.

MSFT, GOOGL, and AMZN: Watch for read-through risk, as each has executed AI-era workforce reductions and could face similar scrutiny over algorithmic HR tools.

CRM: Watch as another mega-cap that has publicly restructured around AI agents, a stated reason for internal workflow changes at peers.

Want more market intelligence? Create your free Unusual Whales account for options flow, market tide, GEX, and the full toolkit.