In San Francisco, a federal judge has rejected a lawsuit filed by a former employee of Twitter seeking at least $500 million in severance pay from the social media company, now renamed X, following Elon Musk’s acquisition of the company and the compensation provided to employees who were laid off as a result.
Federal District Judge Trina Thompson of the Northern District of California ruled on Tuesday (July 9) to dismiss claims by some former Twitter employees against Musk under the Employee Retirement Income Security Act (ERISA), stating that these claims fall outside the jurisdiction of federal law, and thus she lacks the authority to rule on them.
The lawsuit was filed in July 2023 by Courtney McMillian, the director of compensation and benefits at Twitter, and Ronald Cooper, the company’s operations manager. It alleged that the company did not provide adequate severance benefits to affected employees as per their 2019 layoff compensation plan when it conducted mass layoffs after Musk completed the acquisition.
According to the lawsuit, Twitter’s 2019 plan stipulated that employees laid off after the acquisition would receive two to six months’ worth of salary based on their length of service, with additional severance pay calculated at one week’s wages for each year of service.
The plaintiffs claimed that the company only offered one month’s worth of salary as severance to laid-off employees and failed to provide any benefits, including medical insurance, thereby violating the plan.
Musk’s legal team urged the judge to dismiss the lawsuit, arguing that the ERISA law in the United States does not apply as claimed by the plaintiffs in this case.
Judge Thompson agreed with this argument, stating that the federal law does not apply to post-acquisition plans by Twitter since the company did not have a “continuing administrative scheme” to individually review severance pay claims or offer benefits such as continued health insurance and job referrals.
In her ruling, she wrote, “The company only committed to paying cash.”
This decision favored Musk in the lawsuit. In October 2022, he acquired Twitter and immediately began implementing reforms, including laying off thousands of employees.
These actions led to multiple lawsuits from former Twitter employees and suppliers, alleging the company’s failure to pay promised amounts.
Following the release of Tuesday’s ruling, a spokesperson for McMillian’s team stated, “We are disappointed with this ruling and are considering our next steps.”