Very unlikely that the article is wrong. the 4.7 intelligence bump is not that big, plus most of the token spend is in inputs/tool calls etc, much of which won't change even with this bump.
Whether they have violated the contract, like all of law is up to interpretation; Most likely, given Amazon's large team of lawyers, I'm sure they could get away with almost anything.
Employment relationships and tradeoffs are negotiated at the time of hiring. Abruptly changing the terms in the middle with no re-negotiation is unfair. Sure, employees are free to leave and find another job, but with a layoff an employee has many benefits such as severance that are offered, where as in this case there are none. Instead of laying off people, should Amazon be able to just reduce their salary to 0, then say they're free to resign if they're not happy with it?
As if RTO solves this at all. Lots of teams are distributed across the many hubs. Amazon is basically asking a large number of its employees to commute hours into the office, or move across the country, just to sit on chime/slack all day anyway.