Elon Musk has secured a legal victory in one of several lawsuits stemming from his controversial decision to terminate over 6,000 Twitter employees, including then-CEO Parag Agrawal, following his acquisition of the social media platform in 2022. On Tuesday, a federal judge dismissed a class action lawsuit against Musk’s X Corp., ruling that the company did not owe the former employees additional severance pay beyond what was offered.
The lawsuit, filed by Twitter’s former head of people experience and another ex-manager, alleged that X Corp. failed to honor contractual severance agreements. According to the complaint, Twitter’s Severance Plan, active since 2019, had promised senior employees up to six months of severance pay. However, following Musk’s takeover, fired employees were reportedly offered at most three months of severance pay, a discrepancy Musk publicly acknowledged in a tweet.
The plaintiffs argued that Musk’s actions violated protections under the federal Employee Retirement Income Security Act (ERISA), claiming damages amounting to potentially over $500 million.
U.S. District Judge Trina Thompson, presiding over the case in San Francisco, dismissed the lawsuit on the grounds that ERISA protections did not apply. Judge Thompson noted that X Corp. had promptly notified employees after the October 2022 takeover that they would only receive cash payouts upon termination. Consequently, the judge ruled that the mass firings in November fell outside the scope of Twitter’s previous severance plan.
In response to the ruling, a spokesperson for Sanford Heisler Sharp, the law firm representing the plaintiffs, expressed disappointment and indicated that they were exploring further legal options.
Following the mass layoffs in November 2022, X Corp. drastically downsized Twitter’s workforce, reducing it to approximately 1,500 employees from around 8,000 prior to Musk’s acquisition. Musk justified these layoffs as necessary cost-cutting measures aimed at stabilizing the company’s financial position. Despite these efforts, X Corp. reported significant losses, with documents obtained by Bloomberg revealing a $456 million deficit in the first quarter of 2023.
While Musk has prevailed in this particular lawsuit, he still faces ongoing legal challenges related to the mass firings. Agrawal and three other former Twitter executives are pursuing $128 million in severance payments from X Corp. in a separate lawsuit. Additionally, former senior employees of Twitter have filed another lawsuit seeking more than $1 million in severance payments, claiming that Musk did not honor their benefit plans.
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The outcome of these remaining lawsuits will likely have further implications for Musk and his management of Twitter as he navigates the complexities and legal ramifications of the platform’s restructuring under his ownership.
