Elon Musk Wins Dismissal of $500M Severance Lawsuit from Ex-Twitter Employees
Elon Musk secured a legal victory with the dismissal of a lawsuit alleging he failed to pay $500 million in severance to thousands of Twitter employees laid off following his acquisition of the social media company, now rebranded as X. U.S. District Judge Trina Thompson in San Francisco ruled on Tuesday that the claims did not fall under the Employee Retirement Income Security Act (ERISA), which governs benefit plans, thereby removing her jurisdiction required to enforce the severance payments.
The plaintiffs, including former compensation and benefits overseer Courtney McMillian and operations manager Ronald Cooper, argued that Twitter's 2019 severance plan promised employees who remained post-buyout either two or six months of pay, in addition to one week of pay for each year of being employed, if the company laid them off. However, after Musk acquired Twitter for $44 billion in October 2022, he significantly reduced the company's workforce and offered severance packages that were inconsistent with the established plan. The lawsuit claims that Musk's team offered employees only one month of severance pay without any additional benefits, and some employees receiving no severance pay at all.
Judge Thompson's decision centered on the nature of the severance plan implemented after the buyout. She noted that ERISA did
not apply because there was no "ongoing administrative scheme." The legal framework of ERISA was deemed inapplicable to Twitter's severance plan following Elon Musk's acquisition because Twitter’s plan did not include a structured process for handling individual claims or offering benefits such as ongoing health insurance or out placement services, which are typical under ERISA regulations. "There were only cash payments promised," Thompson stated, thus failing to meet the criteria for ERISA coverage.
This case is one of several lawsuits filed against Musk and X by former employees. These suits include allegations of targeting women, minorities, and disabled workers for layoffs, failing to provide legally required advance notice, and not honoring promised bonuses. Among these legal challenges, four former top executives at Twitter, including ex-CEO Parag Agrawal, have also sued
Musk totaling to $128 million in unpaid severance. The executives allege that Musk wrongfully accused them of misconduct and retaliated against them for filing a lawsuit.
The plaintiffs have the option to amend their complaint, but only for claims outside the scope of ERISA.
