Elon Musk wins lawsuit over Twitter severance payments

Onwubuke Melvin
Onwubuke Melvin

Alex Omenye

Elon Musk is embroiled in multiple lawsuits following his 2022 acquisition of Twitter, during which more than 6,000 employees, including then-CEO Parag Agrawal, were terminated.

On Tuesday, Musk secured a victory in one such lawsuit as a federal judge ruled that X Corp. does not owe additional severance to the former employees.

The lawsuit, initiated by Twitter’s former head of people experience and another ex-manager, claimed that X Corp. provided less severance pay than promised. According to the complaint, the fired employees received at most three months of severance, a figure Musk confirmed via a tweet.

The plaintiffs argued that Twitter’s Severance Plan, active since 2019, had guaranteed senior employees up to six months of severance pay.

The plaintiffs estimated that Musk owed the former employees over $500 million, citing protections under the federal Employee Retirement Income Security Act.

U.S. District Judge Trina Thompson dismissed the class action lawsuit in San Francisco on Tuesday.

In her ruling, Judge Thompson stated that the ERISA protections did not apply because Musk’s company informed employees shortly after the October 2022 takeover that severance would only be paid in cash. As a result, the mass layoffs in November were not governed by Twitter’s previous severance plan.

“We are disappointed in the ruling and considering our options for moving forward,” a spokesperson for Sanford Heisler Sharp, the law firm representing the plaintiffs, said in an email to TechCrunch.

Following the November 2022 firings, X Corp. has maintained operations with a significantly reduced staff. Musk told the BBC in 2023 that he reduced Twitter’s workforce from approximately 8,000 to 1,500 employees as part of major cost-cutting measures. Despite these efforts, X Corp. continues to face financial difficulties, with documents obtained by Bloomberg revealing a $456 million loss in the first quarter of 2023.

Musk still faces additional legal challenges related to the mass firings. Parag Agrawal and three other former Twitter executives are seeking $128 million in severance payments from X Corp. Additionally, a separate lawsuit from other former senior employees is demanding over $1 million in severance payments, although Musk contends that he never agreed to their benefit plans.

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