Twitter hit with ERISA lawsuit for failure to pay $50M in severance to ex-employees
The lawsuit was brought by a former Twitter employee who oversaw the company’s employee benefits program on behalf of thousands of employees who were laid off after Elon Musk acquired the company in 2019.
A lawsuit filed on Wednesday alleges that Twitter failed to pay at least $500 million in promised severance to thousands of employees who were laid off after Elon Musk acquired the company. Courtney McMillian, who oversaw Twitter’s employee benefits programs before she was laid off in January, filed the proposed class action in San Francisco federal court.
McMillian claims that under a severance plan created by Twitter in 2019, most workers were promised two months of base pay plus one week of pay for each full year of service if they were laid off. Senior employees such as McMillian were owed six months of base pay, according to the lawsuit. In addition, all employees were entitled to bonuses, a cash contribution for health insurance and three to six months of outplacement services, according to the lawsuit. However, Twitter provided laid-off workers with at most one month of severance pay, and many of them did not receive anything, the lawsuit said.
Before Musk took over the company, Twitter had a severance plan, which the lawsuit alleges was an employee benefit plan under ERISA and that Musk assured employees that Twitter would continue to pay benefits under the severance plan.
After Musk assumed control of Twitter in October 2022, he dismissed Twitter’s executive leadership and board, and launched four rounds of broad employee terminations. Musk and Twitter terminated employees without providing information about anticipated changes to the severance plan and without paying the employees the benefits to which they were entitled under the plan, the plaintiffs said.
Related: Severance agreements take another hit: The NLRB General Counsel weighs in
“Musk initially represented to employees that under his leadership Twitter would continue to abide by the severance plan,” said Kate Mueting, administrative partner in the law firm Sanford Heisler Sharp, which is representing the plaintiffs. “He apparently made these promises knowing that they were necessary to prevent mass resignations that would have threatened the viability of the merger and the vitality of Twitter itself.”
Twitter already has been sued for allegedly failing to pay severance, but those cases involve breach of contract claims and not benefits law. The company has said it has paid ex-employees in full. A pending lawsuit filed last month accuses Twitter of also failing to pay millions of dollars in bonuses it owes to remaining employees. Twitter has said the claims lack merit.
The company also faces a series of other lawsuits stemming from the layoffs that began last year, including claims that it targeted women and workers with disabilities. Twitter has denied wrongdoing in the cases in which it has filed responses.