Elon Musk's recent legal victory over a $500 million claim from former Twitter employees highlights the complexities of corporate acquisitions and employee rights in the tech industry.
This case not only reflects the financial stakes and legal maneuvering in corporate takeovers but also raises broader questions about employee protections amid industry restructuring.
Elon Musk won a lawsuit, as a federal judge ruled that X, formerly known as Twitter, does not owe its former employees any more severance.FREDERIC J. BROWN/AFP via Getty Images
Elon Musk Wins Case vs. Former Twitter Employees
Following a recent legal ruling, Elon Musk has sidestepped a significant financial obligation to former Twitter employees, amounting to $500 million. TechCrunch reported that the controversy arose after Musk acquired Twitter, leading to massive layoffs affecting over 6,000 employees.
A spokesperson from Sanford Heisler Sharp, the law firm representing the plaintiffs in this case, expressed disappointment with the ruling and mentioned they are exploring their next steps.
Among them, Courtney McMillian spearheaded a class-action lawsuit, arguing that Musk's actions violated federal employment laws that guarantee severance benefits.
Specifically, the lawsuit claimed that the Twitter Severance Plan entitled laid-off workers to three months' pay, which they allegedly did not receive in full. The plaintiff claimed that Musk owed over $500 million to these former employees, citing federal Employee Retirement Income Security Act (ERISA) protections.
Despite the claims, US District Judge Trina Thompson, based in the Northern District of California, dismissed the case on Tuesday, favoring Musk's defense against the allegations.
Thompson's court filing noted that ERISA protections were deemed inapplicable because Musk's company informed employees after his October 2022 acquisition that terminated employees would only receive cash payouts.
According to the judge's ruling, this notification meant that the mass layoffs in November fell outside the scope of Twitter's former severance plan.
This court decision is disappointing for the many former Twitter employees affected by the layoffs, but there remains a potential path for them to pursue higher compensation.
Thompson's ruling highlighted that the plaintiffs can revise their complaint regarding claims not covered by ERISA. Should they proceed, Thompson was willing to connect this case with ongoing litigation involving X Corp/Twitter.
Other lawsuits are also in progress, including one seeking $128 million in severance for former Twitter executives and another aiming to recover approximately $1 million in unpaid legal fees.
Despite these efforts, X has faced ongoing challenges. Documents obtained by Bloomberg revealed a $456 million loss in the first quarter of 2023.
Musk still faces legal challenges over the mass layoffs. In a separate lawsuit, Agrawal and three other former executives of Twitter Inc. are pursuing $128 million in severance from X Corp. following their termination in the layoffs.
Another lawsuit by former senior employees at Twitter seeks over $1 million in severance, although Musk contends he never agreed to these employees' benefit arrangements.
