Elon Musk is no longer required to pay $500 million in severance to former Twitter employees after a court decision. US District Judge Trina Thompson in San Francisco dismissed a lawsuit that claimed Musk refused to pay the severance after he laid off many employees at Twitter, now called X, following his purchase of the company.
The lawsuit said Musk was supposed to provide severance pay according to the federal Employee Retirement Income Security Act (ERISA). However, Judge Thompson ruled that ERISA did not apply to the former employees’ claims, so she could not handle the case.
This lawsuit is one of several that claim Musk did not keep promises to former Twitter employees and vendors after buying the social media company for $44 billion in October 2022.
According to the complaint, Twitter’s 2019 severance plan said employees who stayed after the buyout would get between two to six months of pay, plus an extra week of pay for each year they worked if they were laid off.
The class-action lawsuit, filed by former Twitter employee Courtney McMillian, claimed that under ERISA, laid-off workers were owed three months of pay. However, the employees received less than this amount, leading to the demand for $500 million in unpaid severance.
Judge Thompson ruled that the severance plan did not qualify under ERISA because a different payout scheme was communicated before the layoffs. She dismissed the case, stating that the severance program after Musk’s takeover was the relevant one, not the 2019 plan cited by the plaintiffs.
Plaintiffs Courtney McMillian, who managed Twitter’s compensation and benefits, and Ronald Cooper, an operations manager, claimed that Twitter only offered one month of pay as severance, without any additional benefits. Despite the dismissal, Judge Thompson allowed the plaintiffs to amend their complaint for claims not covered by ERISA.
This decision is a setback for the thousands of former Twitter employees affected by the layoffs, but they still have opportunities to seek larger payments. The ruling indicated that the plaintiffs could amend their complaint for non-ERISA claims.
If they proceed, Judge Thompson might consider combining this case with other ongoing lawsuits against X Corp/Twitter. Other lawsuits include former top executives seeking $128 million in unpaid severance and about $1 million in unpaid legal fees.
This ruling is a significant moment in the ongoing legal battles following Musk’s acquisition of Twitter, as former employees continue to seek compensation through various legal channels.
