A federal judge has ruled that Elon Musk’s company, X Corp., does not owe $500 million in severance to former Twitter employees. This decision came from a lawsuit filed after Musk’s 2022 takeover of Twitter, during which over 6,000 employees, including then-CEO Parag Agrawal, were dismissed.
What Were the Lawsuit’s Claims?
The lawsuit, brought by Twitter’s former head of people experience and another ex-manager, claimed that X Corp. provided less severance than promised. The complaint stated that Twitter offered a maximum of three months’ severance pay to the fired employees, confirmed by Musk in a tweet. This was less than the six months of severance pay senior employees were previously promised under Twitter’s Severance Plan, effective since 2019.
The plaintiffs estimated Musk owed upwards of $500 million, citing protections under the Employee Retirement Income Security Act (ERISA). However, U.S. District Judge Trina Thompson dismissed the lawsuit in San Francisco, stating that ERISA protections did not apply. The judge explained that Musk’s company had notified employees shortly after the October 2022 takeover that terminated employees would only receive cash payouts. Therefore, the November firings were not subject to the previous severance plan.
A spokesperson for Sanford Heisler Sharp, the law firm representing the plaintiffs, expressed disappointment with the ruling and mentioned considering options for moving forward.
Impact of the Firings on X Corp.
Since the November 2022 firings, X Corp. has operated with a significantly reduced staff. Musk informed the BBC in 2023 that he had reduced Twitter’s workforce from 8,000 to 1,500 employees as part of major cost-cutting efforts. Despite these measures, X Corp. has continued to face financial difficulties. Documents obtained by Bloomberg revealed that the company lost $456 million in the first quarter of 2023.
Ongoing Legal Challenges
Musk still faces other legal challenges regarding the mass firings. Another lawsuit involves former CEO Parag Agrawal and three other ex-executives seeking $128 million in severance payments. Additionally, former senior employees are demanding more than $1 million in severance payments in a separate lawsuit. Musk asserts that he never agreed to the benefit plans claimed by these former employees.
Featured Image courtesy of Guglielmo Mangiapane/REUTERS
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