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Elon Musk and Twitter Face Legal Turmoil Once More
Elon Musk and Twitter are currently embroiled in a legal battle as former employees of the social media platform accuse the company of reneging on promised severance packages. The lawsuit, filed in the U.S. District Court for the Northern District of California, represents a class of terminated employees since Musk assumed control of Twitter in late October 2022. Seeking damages of at least $500 million, the plaintiffs’ lawyers aim to compel Twitter and Musk to fulfill their obligations under the severance plan and pay all terminated employees what they are owed.
Courtney McMillian, a former employee in Twitter’s HR department, serves as the lead plaintiff in the case. Sanford Heisler Sharp, a law firm, has filed the lawsuit on McMillian’s behalf, naming X Corp. (the successor company to Twitter) and Musk as defendants. The complaint alleges that prior to Musk’s takeover, Twitter had an existing severance plan under the Employee Retirement Income Security Act of 1974 (ERISA). The lawsuit claims that both Musk and Twitter assured employees that benefits under the severance plan would continue after the acquisition. However, since Musk assumed control, the promised benefits have allegedly gone unpaid to thousands of terminated employees.
“Musk initially represented to employees that under his leadership, Twitter would continue to abide by the severance plan,” stated Kate Mueting, Sanford Heisler Sharp’s firm administrative partner in Washington, D.C. These promises were apparently made to prevent mass resignations that could have jeopardized the merger’s viability and Twitter’s vitality.
BREAKING: Twitter is accused of refusing to pay at least $500 million in promised severance to thousands of employees laid off after Elon Musk acquired the company, according to a lawsuit pic.twitter.com/rvB9XvevFa
— Daily Loud (@DailyLoud) July 12, 2023
After Musk’s takeover, Twitter underwent significant changes, including dismissing executive leadership and dismantling its board. Subsequently, the company implemented four rounds of broad employee layoffs, reducing its workforce by approximately 80%.
The recent lawsuit claims that Musk and Twitter terminated employees without providing information about changes to the severance plan and failed to pay the entitled benefits. The severance plan outlined compensation ranging from two months to six months of base pay, based on an employee’s tenure, along with additional benefits such as vested restricted stock units, bonuses, health insurance contributions, and outplacement services.
Alleging a breach of fiduciary duties to the employee plan, the plaintiffs’ law firm argues that Musk and Twitter misled employees about their eligibility for severance pay and withheld payments to support the company’s financial stability.
