A legal battle concerning severance pay for former Twitter employees took a decisive turn this week as Elon Musk successfully had a class-action lawsuit dismissed in federal court. The suit, which alleged wrongful denial of severance pay under the Employee Retirement Income Security Act (ERISA), was presided over by US District Judge Trina Thompson in the Northern District of California.
The lawsuit was initiated by former Twitter employees Courtney McMillian and Ronald Cooper. They contended that the severance offered — typically one month of pay — fell short of what employees were entitled to receive as participants in Twitter’s severance plan. The plaintiffs sought to represent a class of all participants in the severance plan terminated after Musk acquired Twitter, now known as X Corp, in October 2022. They argued that terminated employees were still owed no less than $500 million. More details on the case can be found here.
X Corp countered that the severance plan did not fall under ERISA’s jurisdiction. Judge Thompson agreed, noting that the plan was not an ongoing administrative program but rather a series of fixed payments based on clear criteria, such as length of tenure and job level. This does not meet ERISA’s requirement for a discretionary, ongoing administrative program.
While the ERISA-based claims were dismissed, Judge Thompson emphasized that the plaintiffs were not left without options. They may amend their complaint to pursue non-ERISA claims such as breach of contract or promissory estoppel. These claims could relate to the mass layoffs in 2022 and 2023.
In addition, there’s a possibility that this case may be linked to another ongoing lawsuit against X Corp, Cornet v. Twitter, which alleges violations of the Worker Adjustment and Retraining Notification (WARN) Act. This lawsuit, pending in the District of Delaware, focuses on Twitter’s failure to provide the federally mandated 60 days’ notice before layoffs. More information on the Cornet case is available here.
Despite recent setbacks for the plaintiffs, this complex web of litigation is far from over. In September 2023, X Corp agreed to enter settlement talks with approximately 2,000 laid-off employees, although no resolution has yet been reached. Read about the attempted settlement here.