Lawsuit Alleges Elon Musk and Twitter’s Successor X Corp. Violated ERISA By Denying Promised Severance to Terminated Employees
Damages Sought Are At Least $500 Million
SAN FRANCISCO, July 12, 2023 (GLOBE NEWSWIRE) -- Attorneys from Sanford Heisler Sharp today filed suit against Elon Musk and X Corp., Musk’s successor corporation to Twitter, in U.S. District Court for the Northern District of California on behalf of a class of employees terminated since Musk’s takeover of the company in late October 2022.
Prior to Musk’s takeover, Twitter had a severance plan, which the Complaint alleges was an employee benefit plan under ERISA. Prior to his takeover, Musk and Twitter gave multiple assurances to employees that Twitter would continue to pay benefits under the severance plan. However, following his takeover, Twitter and Musk have failed to pay the promised benefits to the thousands of terminated employees. Kate Mueting, Firm Administrative Partner in Washington, D.C.; Charles Field, Chair of the firm’s Financial Services practice in San Diego, CA; and Christopher Owens, Litigation Fellow in Baltimore, MD are representing the class and seeking full recovery of the severance plan benefits Elon Musk and Twitter promised to employees.
“Musk initially represented to employees that under his leadership Twitter would continue to abide by the severance plan,” Mueting said. “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.”
As soon as 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 employees information about anticipated changes to the severance plan and without paying the employees the benefits to which they were entitled under the Plan. Twitter employees were offered at most three months of compensation.
Under the severance plan, many senior employees are entitled to six months base pay plus one week for each full year of service. Employees with less time at the company are entitled to two months’ base pay plus one week for each full year of service. All employees are also entitled to their vested RSUs, bonuses, a cash contribution for health insurance, and three to six months of outplacement services.
The suit alleges Musk and Twitter breached their fiduciary duties to the Plan by misleading class members about their eligibility for severance pay and refusing to make severance payments so those funds could be used to prop up 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 Owens. “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 US law.”
The suit seeks damages of not less than $500 million as well as orders compelling Twitter and Musk to abide by all terms of the severance plan by paying all terminated employees what they are owed, and for independent fiduciaries to be appointed to manage the plan.
About Sanford Heisler Sharp
Sanford Heisler Sharp is a public interest and civil rights law firm with offices in New York, Washington, DC, San Francisco, Palo Alto, Atlanta, Baltimore, Nashville, and San Diego. The firm focuses on employment discrimination, Title IX, wage and hour, whistleblower and qui tam, criminal/sexual violence, financial services, and Asian American litigation and finance matters. Our lawyers have recovered over $1 billion for our clients through many verdicts and settlements.
In 2022, The National Law Journal named Sanford Heisler Sharp Civil Rights Firm of the Year, and it recognized the firm in 2021 as both the Employment Rights Firm of the Year and the Human Rights Firm of the Year. Law360 recognized the firm as Employment Practice Group of the Year in 2021, 2019, 2018, and 2016. Benchmark Litigation recognized the firm as the Labor & Employment Firm of the Year in 2021 and 2020.
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