Elon Musk successfully avoided paying $500 million in severance to thousands of former Twitter employees after a court dismissed their lawsuit.
The lawsuit, led by ex-Twitter employee Courtney McMillian, argued that the employees were owed three months' pay under the federal Employee Retirement Income Security Act (ERISA).
However, US District Judge Trina Thompson ruled that ERISA did not cover the claims, as the severance plan in place did not meet the required standards.
The lawsuit was part of a series of legal actions taken against Musk following his acquisition of Twitter, now known as X, for $44 billion in October 2022.
The plaintiffs, including McMillian and Ronald Cooper, claimed that Twitter's severance plan promised two or six months of pay, plus additional benefits. Instead, laid-off employees received just one month of pay without additional benefits.
Judge Thompson decided that the absence of an "ongoing administrative scheme" rendered the severance plan, which was implemented following Musk's takeover, ineligible under ERISA.
The plan did not offer outplacement services or ongoing health insurance, which are requirements for ERISA coverage. The plan was not covered by ERISA since, as the judge pointed out, only cash payments were offered.
Despite the setback, the former employees have the opportunity to amend their complaint and pursue non-ERISA claims. Judge Thompson indicated that if the plaintiffs choose to amend their complaint, the court might consider relating this case to other ongoing lawsuits against X Corp/Twitter.
These ongoing cases include claims for unpaid severance and legal fees by former top executives.
This ruling is a significant development in the series of legal challenges Musk faces from former Twitter employees and vendors.
While this particular case has been dismissed, it highlights the broader issues surrounding Musk's management practices and the expectations of former employees. The dismissal also sets a precedent for how similar cases might be handled in the future.
The law firm representing the former employees, Sanford Heisler Sharp, expressed disappointment with the ruling and is considering further legal options. The outcome of this case will likely influence other pending lawsuits against X Corp/Twitter, as former employees and executives continue to seek compensation for their severance and legal fees.
Conclusion
The dismissal of this lawsuit underscores the complex legal landscape surrounding Musk's acquisition of Twitter and his subsequent management decisions. Former employees are now faced with the challenge of amending their complaints and pursuing other legal avenues to seek the compensation they believe they are owed. As these cases unfold, they will continue to shape the narrative around Musk's tenure at Twitter and the legal responsibilities of the company to its former staff.