Musk faces class action lawsuit for unpaid severance of $500 million

A former top executive in the human resources department of Twitter has filed a class-action lawsuit against the company, accusing them of withholding approximately $500 million in severance pay owed to former employees.

Courtney McMillian, who previously held the position of "head of total rewards" at the popular social media platform, made these claims in the lawsuit.

Her complaint suggests that Twitter owner Elon Musk was aware of the severance plan before terminating thousands of employees but hesitated due to the associated expenses.

This lawsuit marks the latest in a series of legal actions against the company following the extensive layoffs that transpired after Musk's acquisition of Twitter for $44 billion last year.

According to the lawsuit, the workforce reductions affected approximately 6,000 individuals. The complaint further details that, as per Twitter's severance plan, employees were entitled to a minimum of two months' worth of base salary as severance pay, along with a cash contribution towards health insurance and other benefits. The complaint, which was filed in federal court in San Francisco, asserts that individuals in more senior roles, including McMillian herself, were entitled to six months' worth of base salary as severance pay, in addition to one week for each full year of experience.

However, upon termination, employees received no more than three months of pay. This included one month of severance pay, alongside an additional two months of compensation to comply with a US labour law requiring employers to provide advance notice of layoffs. The lawsuit claims that this sum was only a small fraction of the $500 million owed to the employees under the severance plan.

In November, following a round of extensive layoffs, Musk stated that employees would receive three months' worth of pay, which he stated was "50 per cent more than legally required."

The lawsuit accuses Musk of misleading employees by creating the impression that the company would honour the severance plan, leading some employees to remain with the firm longer than they would have otherwise.

Kate Mueting, the lawyer representing McMillian from Sanford Heisler Sharp, remarked, "Musk initially assured employees that under his leadership, Twitter would continue to uphold the severance plan. 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."