X (formerly Twitter) and its owner Elon Musk have successfully petitioned a California court to dismiss a $500 million unpaid severance lawsuit, marking a temporary victory in the embattled company’s ongoing legal challenges.
Mashable reports that a California district court judge has dismissed a class action lawsuit against X and Elon Musk, which alleged unpaid severance to approximately 6,000 former employees. The court’s decision hinged on the determination that X’s severance plan was not governed by the Employee Retirement Income Security Act (ERISA), effectively nullifying the plaintiffs’ primary argument.
The lawsuit, initially filed in July 2022, came in the wake of Musk’s mass layoffs following his acquisition of Twitter in October 2022. These layoffs resulted in a staggering 70 percent reduction in the company’s workforce. The plaintiffs claimed that laid-off employees were offered only a single month of severance pay, falling short of the benefits outlined in the company’s pre-existing severance plan.
The complaint alleged that Musk’s actions violated the merger agreement, which stated that employees would receive severance and benefits “no less favorable than” those offered immediately prior to his takeover. Specifically, the plaintiffs accused X and Musk of violating ERISA through denial of benefits, breach of fiduciary duty, and failure to provide complete and accurate information about the severance plan.
However, X and Musk’s legal team successfully argued that the company’s severance plan did not fall under ERISA jurisdiction. The court agreed, finding that X’s plan lacked an “ongoing administrative program” for determining severance claims and benefits, which is a key requirement for ERISA governance. Instead, X’s plan relied on set formulas and mathematical calculations rather than case-by-case discretionary analysis.
It’s important to note that while this ruling represents a significant victory for X and Musk, it does not necessarily absolve them of potential legal obligations regarding severance pay. The judge explicitly stated that the plaintiffs could amend and refile their complaint with alternative claims, such as breach of contract or promissory estoppel. This leaves the door open for further legal action, albeit under different legal frameworks.
The dismissed lawsuit is just one of several legal challenges faced by X and Musk regarding severance and layoffs. A group of ultra-woke former Twitter executives filed a $128 million severance suit in March, while another lawsuit seeking $19.3 million was brought forward in April. Additionally, Musk agreed to a settlement last September concerning claims of unpaid severance by nearly 2,000 former employees.
The court’s order noted that at least six lawsuits have been filed against X regarding severance, with an additional five relating to wages and discrimination.
Read more at Mashable here.
Lucas Nolan is a reporter for Breitbart News covering issues of free speech and online censorship.
