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Key takeaways:
- The era of AI-driven layoffs is here, but are they covering up deeper business issues?
- AI typically augments tech roles rather than replacing them; misaligned executive rhetoric creates deep distrust and legal risks regarding transparency.
- Experts predict AI-driven cuts could be reversed as firms realize they prematurely replaced essential human talent with unproven automated workflows.
A handful of tech companies have made sweeping layoffs to reorganize for the AI era. But are there other factors at play?
When Block CEO Jack Dorsey laid off 4,000 workers at the end of February, he insisted that financial woes had nothing to do with the decision. Dorsey wrote on X that although Block’s “business is strong,” the company’s new “intelligence tools” have redesigned workflows to necessitate “smaller and flatter teams.”
In Dorsey’s framing, cutting 40% of his workforce was not a desperate Hail Mary to appease shareholders but, rather, the unfortunate cost of innovation.
But for many tech insiders and former Block employees, Dorsey’s announcement bore the hallmarks of ‘AI washing.’
In a new Forrester report, the term has been adopted for when companies attribute “financially motivated cuts” to the result of AI implementation. Rather than admit to faltering business growth, AI washing allows a company to spin layoffs as proof of a technological edge. A host of recent layoff announcements – including those by software companies Atlassian and Meta – have been cited by spectators and media outlets as likely examples of the practice.
By repositioning layoffs as a product of AI sophistication, companies may stand to gain a temporary competitive advantage. However, AI washing may ultimately impede a company’s future success. In the immediate term, the practice is already stoking distrust across tech’s highly-skilled workforce.
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When cost-cutting masquerades as innovation
Nearly 55,000 layoffs were attributed to AI last year in the US alone, according to a report from career coaching firm Challenger, Gray & Christmas. But those numbers don’t quite line up with the research surrounding AI’s actual impact on the workforce.
“What we found is that most of the jobs that are influenced by AI would be augmented rather than displaced,” says Michael O’Grady, a forecast analyst for Forrester and co-author of the firm’s latest AI job impact report. He also found that tech jobs are not among the most vulnerable to AI automation – despite the fact that tech companies are often at the center of discussions around AI-related job loss.
O’Grady modeled AI’s economic impact by analyzing workers’ knowledge, skills, and abilities and mapping them against the capabilities of the latest AI models. Jobs in office administration, sales, business, and finance showed a pronounced risk of automation, while “computer and mathematical occupations” represented “quite a small share” of jobs likely to be made redundant by AI, O’Grady explains. This discrepancy suggests that many AI-attributed job cuts “could be driven by bottom lines,” he adds.
Even when companies do not tie layoffs to AI adoption, workers take notice when internal messaging about AI enhancements is at odds with their personal experience.
Vinny Costa, a Miami-based software engineer who worked at a large gaming company until the end of last year, recalls that the company’s leadership leaned into messaging about AI efficiency gains in team meetings throughout 2025. The reality on the ground, however, was very different.
“The efficiency we gained from AI coding tools actually created more work for product managers, business analysts, and middle managers,” Costa says. “And because the technical output increased, they had to deal with more decision making and more sync meetings just to keep the product on track.”
The dynamic Costa describes bears striking similarities to the contrast between Dorsey’s public messaging and interviews with former Block employees. Following Block’s layoff announcement, Dorsey told Wired that the cuts were precipitated by sharp recent advancements in AI tooling. Multiple ex-employees countered this claim in The Guardian, with one of the interviewed workers saying, “There’s a distinction between what’s technically possible and just – pardon my French – whatever CEO bullshit will happen based on their own interpretation of how AI works.”
Costa says there was also a “huge disconnect” between executives’ rhetoric of massive AI gains and the company’s financial performance. “It’s a publicly-traded company, so you could see how its revenue and market valuation were going. It wasn’t really lining up.” (It has also been noted that Atlassian and Block’s layoffs came during a period of pronounced declines in each company’s respective stock.)
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Beware the AI excuse
Companies have the right to conduct layoffs. But honesty matters, both reputationally and in the eyes of the law.
Kelsey Szamet, a partner at the Los Angeles employment law firm Kingsley Szamet, explains that when an organization tells workers they’re being let go due to AI or automation, that claim may come under legal scrutiny if those workers later challenge the decision in court. The inverse also applies: “If the company is saying publicly that layoffs are because of AI, but internally they’re saying it’s because they want to cut costs or want to improve performance, that raises issues.”
From a legal standpoint, Szamet offers a simple rule of thumb: Companies citing AI in layoffs should be able to point to concrete organizational changes that have resulted from AI implementation. “If they can’t point to that, then maybe this is not a reason that they should be using,” Szamet says.
Matt Hasan, a New York City consultant who advises financial organizations on AI strategy, believes that AI washing is fundamentally at odds with effective AI integration. “It creates a credibility gap all around, and it’s a very shortsighted approach for dealing with underlying business issues,” he says. “It’s also not going to benefit the organization.”
For AI implementation to flourish, Hasan is emphatic that workers need to be central to an organization’s strategic planning: “It’s not a replacement process; it’s a coexistence process.”
O’Grady agrees. “You want a harmonious relationship between AI and the person using AI to optimize their work,” he says. In his view, this means that organizations should focus on building processes that support a positive feedback loop between worker and tool, making adaptive adjustments as needed.
Organizations should also strive to maintain workers’ trust, which ultimately enhances the likelihood of a successful rollout. “The firms that can manage to do that will be at an advantage,” O’Grady says.
Trustworthiness and truthfulness go hand-in-hand. Some organizations may soon face the opportunity to cultivate more of both: Forrester’s 2026 future-of-work report predicts that over half of AI-attributed layoffs will be “quietly reversed” as companies realize the operational pitfalls of prematurely replacing human talent. Mere weeks following Block’s massive layoffs, at least four of the company’s employees say they’ve been rehired.
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