Elon Musk has encountered a significant legal setback in his efforts to avoid severance payments to former Twitter executives who were terminated during his 2022 takeover of the company. On Friday, a judge ruled that former CEO Parag Agrawal and other top executives can proceed with their claims, asserting that Musk fired them right as the deal was closing to evade paying their agreed-upon severance packages.
In a lawsuit filed in March, the executives contended that Musk deliberately cut them off before they could formally resign, thereby denying them the compensation they were entitled to. The suit referenced a statement Musk made to biographer Walter Isaacson, where he expressed urgency in closing the deal to avoid a “$200 million differential in the cookie jar” between closing the deal that evening and the next morning.
Joining Agrawal in the legal battle are former legal chief Vijaya Gadde, former CFO Ned Segal, and former general counsel Sean Edgett. All four executives claim they are owed one year’s salary, along with unvested stock awards valued at the acquisition price.
This is not Musk’s first encounter with legal issues concerning employee compensation. Following his acquisition of Twitter, now rebranded as X Corp., Musk laid off thousands of employees as part of a major restructuring initiative. Many of those affected have filed claims for unpaid severance, alleging that Musk did not adhere to the promised compensation terms.
In July, Musk and X Corp. won a class-action lawsuit brought by laid-off employees who sought $500 million in severance under the Employee Retirement Income Security Act. However, in September, a former employee was awarded unpaid severance in a private arbitration session, which could set a precedent for similar cases in the future.
US District Judge Maxine Chesney, who is overseeing the executives’ case, also denied Musk’s request to dismiss a similar claim filed by Nicholas Caldwell, a former general manager in “core tech,” who is seeking $20 million in compensation for lost severance.
As these legal challenges unfold, Musk continues to face scrutiny over his management practices and the treatment of former employees, highlighting the complexities of corporate governance during times of significant transition.
MUST READ: OpenAI Launches Real-Time Search Feature in ChatGPT, Taking on Google and Bing
