Judge: Elon Musk’s X breached Twitter contracts in failing to pay ex-employees millions in bonuses

Former Twitter employees may soon be able to sue Elon Musk’s X Corporation after a California federal judge ruled on Friday that Twitter’s previous agreements to pay millions of dollars in bonuses to ex-employees were valid.

It began with a lawsuit filed by former employee Mark Schobinger, who was Twitter’s director of compensation before Musk’s November 2022 takeover of the company.

Schobinger sued what is now known as X Corporation in June, alleging that he was promised a bonus the previous year — prior to Musk’s takeover — and the social media company refused to cough it up.

X filed a motion to dismiss  Schobinger’s lawsuit, and Judge Vince Chhabria denied the request, “paving the way for workers to sue for the millions of dollars the social media company allegedly refused to pay” in the months following Musk’s rocky ascent to the role of “Chief Twit,” according to Forbes.

In his lawsuit, Schobinger argued that he and some of his fellow employees were “repeatedly” promised by former Twitter CFO Ned Segal that they would be paid “bonus based on the company’s bonus plan—a payment scheme based on how well the company performs financially as a whole,” Forbes explains. “After Musk’s acquisition of the company in November, the employees were told their 50% bonuses would remain intact if they chose to stay at the company under the new leadership.”

Despite offers of employment elsewhere following Musk’s takeover, Shobinger stayed at Twitter, waiting for March when the company typically paid bonuses.

When the first quarter of the new year ended and no bonuses were paid, Shobinger filed his lawsuit in June citing breach of contract.

Attorneys for X argued that the so-called Performance Bonus Plan was neither valid nor unenforceable contract. X could not, they stated be forced under state law to honor what amounted to an oral agreement between Schobinger and the company’s old management.

California’s oral contracts rules “come into play only when a valid, enforceable written contract already exists,” Judge Chhabria ruled, noting that X had already argued the invalidity of a written contract covering the discretionary bonuses.

Thus, Chhabria ruled, Schobinger had “plausibly stated a breach of contract claim under California law.”

The implications are enormous for the embattled Musk’s free-speech platform.

“If the lawsuit and similar cases are successful,” Forbes reports, “the company could be forced to pay out millions to Schobinger and other former employees who say they were promised bonuses if they stayed on after Musk’s purchase of the social media company.”

And, as the outlet states, X is already facing “a series of legal disputes between the company and its former employees, after Musk laid off thousands of Twitter staff members in his early months at the social media company’s helm.”

More than 2,200 arbitration cases were filed against X by disgruntled employees in the months following Musk’s takeover. The former staffers claim that Musk’s leadership team refused to pony up their promised severance pay.

“Several former employees have now sued the company, noting the company’s sale agreement with Musk included a clause ‘that protected its employees by ensuring that they would receive severance at least as favorable during the post-merger period as they had under the old management,'” Forbes reports. “Another class action lawsuit filed by ex-employees claimed the company owes up to $500 million in unpaid severance for the nearly 5,000 staffers it has laid off since November.”

Melissa Fine


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