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Elon Musk and Twitter slapped with $500 Million lawsuit by ex-employee over severance pay

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Elon Musk and Twitter are being sued by ex-employees of the social media company who allege that the company has not paid them the promised severance package.

The lawsuit was filed at US District Court for the Northern District of California on behalf of a class of employees terminated since Musk’s takeover of Twitter in October 2022. The lawsuit seeks at least $ 500 million of damages as well as orders compelling Elon Musk and Twitter to abide by the terms of the severance and pay all of the ex-employees what they are owed.

The lead plaintiff in this case is Courtney McMillian, an employee in Twitter’s HR department who worked for Twitter from August 2020 till January 2023. The law firm Sanford Heisler Sharp has filed the lawsuit on behalf of her, naming X corp and Elon Musk as the defendants.

Prior to the takeover by Elon Musk, Twitter had a severance plan that was an employee benefit plan under the Employee Retirement Income Security Act of 1974 (ERISA). Even during the takeover, Musk and the tech mogul had assured all the employees about the severance plan and that it would be intact. However, post Musk took over, Twitter and Elon Musk have not paid the promised benefits to the thousands of employees who were fired, the lawsuit has alleged.

“Musk initially represented to employees that under his leadership Twitter would continue to abide by the severance plan,” Kate Mueting, Sanford Heisler Sharp’s firm administrative partner in Washington, D.C., said in a statement. “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,” she added.

According to the current lawsuit, Musk and Twitter terminated employees without providing them information about anticipated changes to the severance plan and without paying the employees the benefits to which they were entitled under the plan. The lawsuit also alleges that Musk and twitter breached their fiduciary duties to the employment plan by misleading class members of their eligibility and then refusing to pay them the severance payments.

As per the complaint, Twitter employees were offered at most three months of compensation, the complaint alleges. Under Twitter’s 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 restricted stock units, bonuses, a cash contribution for health insurance, and three to six months of outplacement services.

Twitter has in the past been the target of multiple lawsuits because of its mass termination of employment. In May, a federal judge dismissed a class action lawsuit against Twitter claiming that the company targeted female employees for layoffs. In May, another lawsuit against Twitter was dismissed alleging that Twitter discriminated against people with disabilities by requiring people to come in to work in person and to commit to an extremely hardcore work culture.

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