Elon Musk doesn’t have to pay $500 million severance pay to former Twitter employees, court rules

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Elon Musk is facing multiple lawsuits for firing more than 6,000 Twitter employees, including then-CEO Parag Agrawal, following his acquisition of the social media platform in 2022. On Tuesday, Musk defeated one of those lawsuits, as a federal judge ruled that X Corp does not have to pay any more severance pay to former employees.

The lawsuit, filed by Twitter’s former head of People Experience and another former manager, alleges that X Corp paid laid-off Twitter employees less than promised in the contract. The complaint states that Twitter offered a maximum of three months’ salary to these 6,000 laid-off employees, which was confirmed by Musk in a tweet at the time. According to the complaint, Twitter’s retirement plan, which was effective from 2019, had previously promised to pay more than six months’ salary to senior employees.

The plaintiffs estimated that Musk owed these former employees more than $500 million, citing protections received under the federal Employee Retirement Income Security Act (ERISA).

US District Judge Trina Thompson dismissed the mass lawsuit in San Francisco on Tuesday.

In a court filing, Judge Thompson said ERISA protections did not apply because Musk’s company had informed employees shortly after the October 2022 acquisition that laid-off workers would receive only cash payments. Because of this notice, the mass layoffs that occurred in November were not under Twitter’s previous severance plan, according to the judge.

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

Since being fired in November 2022, X Corp has operated the social media platform with a greatly reduced staff. Musk told the BBC in 2023 that he had reduced Twitter’s workforce to 1,500, down from around 8,000 before his acquisition, as part of a major cost-cutting effort. Despite the efforts, X has continued to struggle, as documents obtained by Bloomberg revealed the company lost $456 million in the first quarter of 2023.

Musk is still not out of the mess following these mass layoffs. In another lawsuit, Agrawal and three other former Twitter Inc. executives are seeking $128 million in severance payments from X Corp following the mass layoffs. Another lawsuit filed by former senior Twitter employees seeks severance payments of over $1 million, but Musk says he never agreed to the benefit plans of these former employees.

This article was updated on July 10 at 12:48 PM PDT to include comments from Sanford Heisler Sharp.

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