Elon Musk, Twitter hit with $500m lawsuit over unpaid severance payments

Twitter owner Elon Musk at a meeting with the French Minister for the Economy and Finances in Versailles, France. AFP/File
Twitter owner Elon Musk at a meeting with the French Minister for the Economy and Finances in Versailles, France. AFP/File

Former employees of Twitter have filed a lawsuit against CEO Elon Musk and the social media platform, alleging the company failed to fulfill promised severance packages. 

The lawsuit, seeking damages of at least $500 million, accuses Musk and Twitter of breaching their fiduciary duties by misleading employees about their eligibility for severance pay and withholding the payments to support the company.

The lead plaintiff in the case, Courtney McMillian, who worked in Twitter’s HR department, claims that Twitter and Musk failed to pay the promised benefits to thousands of terminated employees following Musk’s takeover of the company in October 2022. Under the severance plan in place prior to the acquisition, employees were entitled to compensation based on their years of service and other benefits such as vested restricted stock units and outplacement services.

“Musk initially represented to employees that under his leadership Twitter would continue to abide by the severance plan,” said Kate Mueting, the firm administrative partner at Sanford Heisler Sharp, the law firm representing the plaintiffs. “He apparently made these promises knowing that they were necessary to prevent mass resignations that would have threatened the viability of the merger and the vitality of Twitter itself.”

The lawsuit further alleges that terminated employees were not provided with information about changes to the severance plan and were given significantly reduced compensation, with some receiving no severance pay at all. The plaintiffs argue that Twitter’s actions violated the Employee Retirement Income Security Act of 1974 (ERISA), which governs employee benefit plans.

The lawsuit adds to the series of legal challenges Twitter has faced in relation to its mass layoffs. The company has previously been accused of gender discrimination and failing to pay bonuses owed to remaining employees. However, these cases differ from the current lawsuit, which focuses specifically on severance pay and violations of the benefits law.

The outcome of this lawsuit will have significant implications for both Musk and Twitter. If successful, the plaintiffs could potentially receive substantial financial compensation, and the case may expose the company to further scrutiny regarding its treatment of employees. Twitter has yet to provide an official statement regarding the lawsuit, instead responding to requests for comment with an emoji.

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