Elon Musk does not owe ex-Twitter staffers $500 million in severance, court rules

Elon Musk faces several lawsuits following his 2022 takeover of Twitter, during which he fired over 6,000 employees, including then-CEO Parag Agrawal. Recently, Musk won one such lawsuit, with a federal judge ruling that X Corp. doesn’t owe additional severance to the former employees.

The lawsuit, initiated by Twitter’s former head of people experience and another ex-manager, claimed X Corp. paid less severance than promised. The complaint highlighted that the 6,000 fired employees received, at most, three months of severance pay, as Musk confirmed in a tweet at the time. Previously, Twitter’s Severance Plan, effective since 2019, had promised senior employees up to six months of severance pay.

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

Musk had previously tweeted on November 4, 2022:
“Regarding Twitter’s reduction in force, unfortunately, there is no choice when the company is losing over $4M/day.
Everyone exited was offered 3 months of severance, which is 50% more than legally required.”

U.S. District Judge Trina Thompson dismissed the class action lawsuit in San Francisco, stating that the ERISA protections did not apply. She noted that Musk’s company had informed employees shortly after the October 2022 takeover that fired employees would receive only cash payouts, thus the November mass firings were not under Twitter’s previous severance plan.

A spokesperson for Sanford Heisler Sharp, the law firm representing the plaintiffs, expressed disappointment with the ruling and mentioned considering options for moving forward.

Since the November 2022 firings, X Corp. has been operating with a significantly reduced staff. Musk told the BBC in 2023 that he reduced Twitter’s staff from roughly 8,000 to 1,500 employees as part of major cost-cutting efforts. Despite these efforts, X Corp. has continued to struggle financially, with documents obtained by Bloomberg showing a $456 million loss in the first quarter of 2023.

Musk still faces additional lawsuits regarding these mass firings. Agrawal and three other former Twitter Inc. executives are seeking $128 million in severance payments from X Corp. Additionally, another lawsuit from former senior employees seeks over $1 million in severance payments. Musk contends that he never agreed to these benefit plans.