Tuesday, July 16, 2024

Lawsuit Seeking $500 Million in Severance from Elon Musk’s X Dismissed by US Court

Elon Musk Wins Lawsuit Over $500 Million Severance Payments for Laid-Off Twitter Employees

Elon Musk, the billionaire entrepreneur and CEO of Tesla and SpaceX, has emerged victorious in a lawsuit filed by laid-off Twitter (now X) employees seeking $500 million in severance payments. The lawsuit alleged that Musk failed to provide promised severance after their termination from the company.

The US District Judge Trina Thompson in San Francisco ruled that the federal Employee Retirement Income Security Act (ERISA) governing benefit plans did not cover the former employees’ claims, therefore lacking jurisdiction. Thompson stated that ERISA did not apply to Twitter’s post-buyout plan as there was no ‘ongoing administrative scheme’ providing benefits such as continued health insurance or outplacement services.

After Musk purchased Twitter (now X) for $44 billion in late 2022, he initiated mass layoffs which prompted laid-off employees to file lawsuits seeking severance. The lawsuit, filed by Twitter’s former head of total rewards, Courtney McMillian, and another ex-manager, claimed that the 2019 severance plan entitled employees who stayed on after the buyout to receive two or six months of pay, plus one week of pay for each year of employment if laid off.

The plaintiffs, who were senior managers, argued that they were entitled to a severance package of six months base salary plus one week for each year of experience, while other senior employees were entitled to two months base pay plus one week for each year of service. The lawsuit alleged that some laid-off employees received no severance at all, while others received only one month’s pay.

In the end, the court’s ruling favored Musk, highlighting the complexities of severance packages and the legalities surrounding them in corporate buyouts. The outcome of this case serves as a reminder for both employers and employees to carefully review and understand their rights and obligations in such situations.

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