Elon Musk Defeats $500 Million Lawsuit Over Twitter Mass Layoffs

By Tom Ozimek

A California judge handed Elon Musk a win in a lawsuit filed over the mass firing of staff at Twitter after he took over the social media platform in October 2022.

Mr. Musk and X Corp. (Twitter was rebranded as X in July 2023) were accused of violating provisions of the federal Employee Retirement Income Security Act (ERISA) by allegedly misleading employees about whether he’d honor a severance plan “at least as favorable” as one developed by prior Twitter management, leading some staff to stay at the company longer than they otherwise would have and getting less severance pay than they expected when they were let go.

The class-action lawsuit, which was brought by Courtney McMillian, who oversaw Twitter’s benefits programs, sought at least $500 million in allegedly owed severance pay to some 6,000 laid-off employees.

In a July 9 order, U.S. District Judge Tina Thompson in San Francisco dismissed the complaint against Mr. Musk, arguing that the employees’ claims weren’t covered under ERISA rules in part because the company notified staff after Mr. Musk took over the company that any laid-off staffers would get lower payouts under a new plan.

“Communications were made by Defendants showing that the named Plaintiffs would no longer have access to the earlier plan, which was discontinued or modified greatly,” the judge wrote.

Another factor weighing in favor of dismissal was that the plaintiffs failed to show that the severance plan Mr. Musk promised after taking the company over broke any provisions of ERISA, which sets rules for benefit plans.

“All of Plaintiffs’ claims in their operative complaint require the plan to be governed by ERISA. As such, the complaint fails to state sufficient facts to survive a Motion to Dismiss,” reads the judge’s order.

The judge gave the plaintiffs 21 days to file an amended complaint that states claims to severance pay based on the plans that were in effect after Mr. Musk took over the social media platform.

Requests for comment sent to attorneys representing Mr. Musk and Ms. McMillian were not immediately returned.

Ms. McMillian’s original complaint claimed that under Twitter’s 2019 severance plan, developed by prior management, most workers were promised two months of their base pay plus one week of pay for each full year of service if they were laid off. Senior employees like Ms. McMillian were promised six months of base pay, plus one week for each full year of experience, according to the complaint.

However, after Mr. Musk took over, laid-off workers were given at most one month of severance and two months’ worth of pay, according to Ms. McMillian’s complaint, which alleged that this was a “fraction” of the $500 million to which laid-off employees were entitled.

Following a round of mass layoffs, Mr. Musk said in a post on Twitter in November 2022 that staff would receive three months’ worth of pay, which he said was 50 percent more than required by law.