Legally perhaps, but firing people particularly en mass is hard to do right, unless you don't care and you are just prepping for a fire sale.

You can lose people who might be key contributors. You can destroy morale in the rest of the company. Everyone else knows they might be next, so they will leave first chance they get. Finally, it signals to the market you are in trouble (hence why a lot of companies are doing it now: better to be just one more company doing layoffs when everyone else is doing it).

This was the point that founder friend was making.

It's hard to look someone in the eye and say they're done

He mentioned several points, all different from what you said

Legally yes.

Morale-wise no.