Twitter’s $500M ERISA lawsuit continues, as employees seek denied severance benefits
Last week, an earlier lawsuit was amended to include another former employee and more details over claims that Twitter (now known as X) denied severance benefits promised to employees, in violation of ERISA.
Legal action against Elon Musk and his company continues a year after he purchased Twitter and changed the name to X.
Late last week, an earlier lawsuit alleging Employee Retirement Income Security Act violations was amended to include another former employee. It also provides more details on claims about Musk’s disregarding of the severance plan in violation of ERISA and the intertwining of Musk and Twitter so he cannot avoid personal liability. In addition to seeking a minimum of $500 million in damages, the suit aims to compel Musk and X to pay terminated employees what they are owed under the severance plan.
“The amended complaint provides additional support for the claims that Twitter and Musk denied severance benefits promised to employees and breached their fiduciary duties in managing their ERISA plan,” said attorney Kate Mueting of Sanford Heisler Sharp. “Thousands of employees were terminated without these benefits. Plaintiffs allege that Musk and Twitter retained the hundreds of thousands of dollars that should have accrued to the terminated employees.”
The lawsuit, which originally was filed by Courtney McMillian (who oversaw Twitter’s employee benefits programs before she was laid off in January 2023) in July in federal court in U.S. District Court for the District of Northern California, alleges that Musk and X breached their fiduciary duties by misleading employees about severance pay eligibility and then failing to make the associated payments. Musk and X instead used those funds to help the company.
“We believe that these defendants were not loyal to Twitter employees as participants in the plan, and they knowingly participated in and enabled each other’s disloyal conduct,” said attorney Christopher Owens of Sanford Heisler Sharp. “As we allege, at the center is Mr. Musk himself, who sought to deprive thousands of people the benefits and compensation they are owed under U.S. law.”
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.
Related: Twitter hit with ERISA lawsuit for failure to pay $50M in severance to ex-employees
More than half of the workforce was laid off as a cost-cutting measure after Musk acquired the company in October 2022, but the company offered severance packages of only one month at most, and many employees received nothing at all, attorneys said.
“Despite giving multiple assurances to all employees that Twitter would continue to provide promised severance benefits following Musk’s takeover, Musk denied these benefits to thousands of terminated employees — a clear violation of ERISA,” Mueting said.