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Elon Musk beats $500 million severance lawsuit by fired Twitter workers

Published 07/10/2024, 11:41 AM
Updated 07/10/2024, 01:37 PM
© Reuters. FILE PHOTO: The new logo of Twitter is seen on Elon Musk’s Twitter account on an iPhone as the old Twitter logo is displayed on a MacBook screen in Galway, Ireland July 24, 2023. REUTERS/Clodagh Kilcoyne/File Photo

By Jonathan Stempel

(Reuters) -Elon Musk won dismissal of a lawsuit claiming he refused to pay at least $500 million of severance to thousands of Twitter employees he fired in mass layoffs after buying the social media company now known as X.

U.S. District Judge Trina Thompson in San Francisco ruled on Tuesday that the federal Employee Retirement Income Security Act governing benefit plans did not cover the former employees' claims, and therefore she lacked jurisdiction.

The case is one of many accusing Musk of reneging on promises to former Twitter employees, including former Chief Executive Parag Agrawal, and vendors after buying the company for $44 billion in October 2022.

Musk also runs the electric car company Tesla (NASDAQ:TSLA), and is the world's richest person, according to Forbes magazine.

An outside spokeswoman for Sanford Heisler Sharp (OTC:SHCAY), which represents the former employees, said the law firm was disappointed and considering its legal options. Lawyers for Musk and X did not immediately respond to requests for comment.

According to the complaint, Twitter's severance plan called for 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 they were laid off.

The plaintiffs Courtney McMillian, who oversaw Twitter's compensation and benefits, and Ronald Cooper, an operations manager, said Twitter instead offered fired employees just one month of pay as severance, with no benefits.

Thompson said ERISA did not apply to Twitter's post-buyout plan because there was no "ongoing administrative scheme" where the company reviewed claims case-by-case, or offered benefits such as continued health insurance and out placement services.

"There were only cash payments promised," she wrote.

© Reuters. FILE PHOTO: The new logo of Twitter is seen on Elon Musk’s Twitter account on an iPhone as the old Twitter logo is displayed on a MacBook screen in Galway, Ireland July 24, 2023. REUTERS/Clodagh Kilcoyne/File Photo

The judge said employees fired in Twitter's 2022 and 2023 mass layoffs can try amending their complaint, but only for claims not governed by ERISA.

The case is McMillian et al v. Musk et al, U.S. District Court, Northern District of California, No. 23-03461.

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