The Severance Dispute at X
Elon Musk’s X Corp, formerly known as Twitter, has been embroiled in a contentious lawsuit over unpaid severance payments to thousands of former employees. The dispute, which centers around claims that X owes approximately $500 million in severance to workers laid off after Musk’s 2022 acquisition of the social media platform, appears to be nearing a resolution. This saga has drawn significant attention due to its scale, the involvement of one of the world’s most prominent billionaires, and the broader implications for corporate accountability and employee rights.
This article delves into the origins of the dispute, the legal arguments, the recent developments signaling a potential settlement, and the lessons to be learned from this high-stakes corporate drama. Optimized for search engines and reader engagement, this piece provides a comprehensive overview of the situation while maintaining clarity and authority.
The Background of the X Acquisition and Layoffs
Musk’s Takeover of Twitter
In October 2022, Elon Musk acquired Twitter for $44 billion, a deal that sent shockwaves through the tech industry. The acquisition was fraught with challenges, including Musk’s initial attempts to back out of the deal, which led to legal battles with Twitter’s leadership. Once the acquisition was finalized, Musk moved swiftly to restructure the company, rebranding it as X Corp and implementing sweeping changes to its operations.
Mass Layoffs and Severance Promises
One of Musk’s most controversial moves was the immediate reduction of the company’s workforce. Within weeks of the acquisition, X laid off approximately 6,000 employees—nearly 80% of its staff. These layoffs were part of Musk’s strategy to streamline operations and cut costs. However, former employees alleged that the company failed to honor severance agreements that had been in place since 2019. According to the plaintiffs, Twitter’s severance plan promised senior employees up to six months of base pay, plus one week of pay per year of service, along with additional benefits such as continued health insurance. Instead, laid-off workers reportedly received only one month’s pay, with some receiving no severance at all.
The Spark of the Lawsuit
The failure to deliver on these severance promises led to a class-action lawsuit filed in 2023 by former employees, including Courtney McMillian, Twitter’s former head of total rewards, and Ronald Cooper, an operations manager. The lawsuit claimed that X and Musk owed at least $500 million in unpaid severance to approximately 6,000 former employees, citing violations of the federal Employee Retirement Income Security Act (ERISA).
Legal Battles and Key Developments
The ERISA Argument and Dismissal
The plaintiffs argued that X’s severance plan fell under ERISA, which governs employee benefit plans and imposes strict standards for their administration. They alleged that Musk and X violated ERISA by denying benefits, breaching fiduciary duty, and failing to provide accurate information about the severance plan. However, in July 2024, U.S. District Judge Trina Thompson in San Francisco dismissed the lawsuit, ruling that ERISA did not apply to X’s severance plan. The judge found that the plan lacked an “ongoing administrative scheme” involving case-by-case reviews or additional benefits like health insurance, as it consisted solely of cash payments determined by fixed formulas.
This dismissal was a significant victory for Musk and X, as it removed the case from federal jurisdiction. However, the judge allowed the plaintiffs three weeks to amend their complaint with non-ERISA claims, such as breach of contract or promissory estoppel, keeping the door open for further legal action.
Arbitration and Individual Victories
Parallel to the class-action lawsuit, thousands of former Twitter employees pursued individual arbitration claims against X, alleging similar grievances. In September 2024, a notable victory emerged when an arbitrator awarded a former employee their full severance package. This ruling, reported by Bloomberg, suggested that arbitration could set a precedent for other claims, potentially pressuring X to settle with the broader group of plaintiffs.
The Tentative Settlement
In a significant turn of events, a court filing on August 21, 2025, revealed that X and the plaintiffs had reached a tentative settlement in the $500 million class-action lawsuit. Both parties requested a delay in an upcoming appeals court hearing to finalize the agreement. While the details of the settlement remain undisclosed, this development marks a potential resolution to a dispute that has spanned over two years and garnered widespread media attention.
Implications of the Severance Saga
Corporate Accountability and Employee Rights
The X severance saga underscores the importance of corporate accountability in honoring employment agreements, particularly during high-profile acquisitions. Musk’s approach to the layoffs—described by critics as abrupt and dismissive—has fueled debates about the treatment of workers in the tech industry. The potential settlement could set a precedent for how companies handle severance obligations during mass layoffs, especially in cases involving significant workforce reductions.
Musk’s Leadership Style and Public Perception
Elon Musk’s handling of the X acquisition and subsequent layoffs has further shaped his polarizing public image. Critics argue that his refusal to pay promised severance reflects a broader pattern of disregarding financial obligations, as evidenced by separate lawsuits from former executives, vendors, and landlords. Supporters, however, view his actions as necessary to transform a struggling company. The resolution of this lawsuit may influence how Musk’s leadership is perceived in future business ventures.
Broader Impact on the Tech Industry
The X severance case highlights the vulnerabilities faced by employees during corporate restructurings. As tech companies navigate economic challenges and ownership changes, the saga serves as a cautionary tale about the importance of transparent communication and adherence to contractual obligations. It also raises questions about the role of federal regulations like ERISA in protecting workers’ rights in modern corporate environments.
Lessons Learned and Future Outlook
Strengthening Severance Agreements
For employees, the X severance saga emphasizes the need for clear, enforceable severance agreements. Workers should advocate for detailed contracts that specify payout terms, benefits, and conditions for termination, reducing the risk of disputes during layoffs.
The Role of Arbitration in Employment Disputes
The success of individual arbitration claims in this case highlights arbitration as a viable alternative to class-action lawsuits. While arbitration can be costly and time-consuming, it may offer a faster path to resolution for individual plaintiffs, particularly when class-action claims face jurisdictional challenges.
What Lies Ahead for X
As X moves toward settling the $500 million lawsuit, the company faces ongoing challenges, including declining revenue and valuation. Reports suggest that X’s value has dropped significantly since Musk’s acquisition, raising concerns about its long-term viability. The resolution of this lawsuit could alleviate some financial pressure, but it remains to be seen how X will navigate its future in a competitive social media landscape.
The $500 million severance saga at Elon Musk’s X Corp is a landmark case that highlights the complexities of corporate acquisitions, employee rights, and legal accountability. While the tentative settlement offers hope for resolution, the dispute has left a lasting impact on X, its former employees, and the broader tech industry. As the dust settles, this saga serves as a reminder of the importance of honoring commitments to workers and the far-reaching consequences of corporate decisions.
