Elon Musk, Twitter Slapped With $500 Million Lawsuit Over Ex-Employee Severance Payments

By Edward Era Barbacena 

Elon Musk and Twitter are being sued by former employees of the social-media network who allege the company failed to pay their promised severance packages.

The lawsuit was filed Wednesday in U.S. District Court for the Northern District of California on behalf of a class of employees terminated since Musk’s takeover of the company in late October 2022. The suit seeks damages of at least $500 million as well as orders compelling Twitter and Musk “to abide by all terms of the severance plan by paying all terminated employees what they are owed,” according to the plaintiff’s lawyers.

The lead plaintiff in the case is Courtney McMillian, who was an employee in Twitter’s HR department from August 2020 through her separation date of Jan. 4, 2023, according to the complaint. Law firm Sanford Heisler Sharp filed the lawsuit on McMillian’s behalf, naming X Corp. (the successor company to Twitter) and Musk as defendants. A copy of the complaint is available at this link.

An email to Twitter’s PR account requesting info returned an autoreply with a poop emoji. Variety also reached out to Alex Spiro, a partner with Quinn Emanuel Urquhart & Sullivan, the law firm that has represented Twitter in various legal matters.

Prior to Musk’s takeover, Twitter had a severance plan, which was an employee benefit plan under the Employee Retirement Income Security Act of 1974 (ERISA), the lawsuit alleges. Prior to the tech mogul’s closing the deal, Musk and Twitter gave multiple assurances to employees that Twitter would continue to pay benefits under the severance plan, according to the complaint. However, following his takeover, Twitter and Musk have failed to pay the promised benefits to the thousands of terminated employees, the lawsuit alleges.

“Musk initially represented to employees that under his leadership Twitter would continue to abide by the severance plan,” Kate Mueting, Sanford Heisler Sharp’s firm administrative partner in Washington, D.C., said in a statement. “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.”

Twitter has been the target of multiple lawsuits associated with its mass layoffs. In May, a federal judge dismissed a proposed class-action lawsuit against Twitter alleging the company targeted women employees for layoffs, saying the complaint lacked specific details. Also in May, a court dismissed a lawsuit alleging Twitter discriminated against workers with disabilities by requiring employees to report to work in-person and commit to an “extremely hardcore” work culture. Shannon Liss-Riordan, the labor attorney who represented plaintiffs in the two cases that were dismissed, told Variety her firm has 11 class-action cases pending against Twitter as well as about 2,000 arbitrations.

After Musk assumed control of Twitter in October 2022, he fired Twitter’s executive leadership and dismantled its board. Twitter then conducted four rounds of broad employee layoffs, slashing its headcount by about 80%, from an estimated 7,800 to about 1,500.

According to the most recent lawsuit, Musk and Twitter terminated employees without providing them information about anticipated changes to the severance plan and without paying the employees the benefits to which they were entitled under the plan. Twitter employees were offered at most three months of compensation, the complaint alleges. Under Twitter’s severance plan, many senior employees are entitled to six months base pay plus one week for each full year of service. Employees with less time at the company are entitled to two months’ base pay plus one week for each full year of service. All employees are also entitled to their vested restricted stock units, bonuses, a cash contribution for health insurance, and three to six months of outplacement services, per the complaint.

The suit alleges Musk and Twitter breached their fiduciary duties to the employee plan by misleading class members about their eligibility for severance pay and refusing to make severance payments “so those funds could be used to prop up the company,” the law firm said in announcing the litigation.