In a significant legal development, a federal judge has ruled that X, formerly known as Twitter, must confront a lawsuit alleging the company failed to pay promised bonuses to its staff. The decision, handed down on Friday, denied X's motion to dismiss the case, paving the way for legal proceedings to continue.
The lawsuit, which was initiated in June 2023, centers around accusations that X did not fulfill its commitments to pay annual bonuses following its acquisition by billionaire Elon Musk in October 2022. Despite assurances from company executives both before and after the deal, employees allege that the promised bonuses were never disbursed.
Background of the Dispute and Legal Implications
The legal action was brought to a San Francisco federal court by Mark Schobinger, a former senior director of compensation at X who left the company in May. Seeking class action status, the lawsuit aims to represent both former and current employees of X who did not receive their 2022 bonuses.
US District Judge Vince Chhabria, in his ruling, stated, “Twitter’s offer to pay him a bonus in return became a binding contract under California law”.This interpretation underscores the potential legal ramifications of oral commitments in employment contracts, particularly in California.
X, which has largely dissolved its public relations team, did not respond to inquiries for comment. In its attempt to dismiss the lawsuit, the company had argued that oral promises should not be legally binding and contended that the case should be adjudicated in Texas.
However, Judge Chhabria upheld that California law, which often favors the enforcement of contracts, should apply in this case. The complaint details that concerns over compensation and annual bonuses arose among employees when Musk's acquisition was announced in April.
The lawsuit claims that in the months leading up to the completion of Musk's takeover, X's executives repeatedly promised that 2022 bonuses would be paid at 50% of the target. Despite these assurances, the bonuses were reportedly not paid, prompting Schobinger to leave the company, citing X's failure to uphold various promises made to its employees.