US court dismisses $500 million severance lawsuit against Elon Musk

In a tremendous legal victory for Tesla CEO Elon Musk, a San Francisco-based US court on Wednesday (Jul10) dismissed a lawsuit alleging that the billionaire refused to pay at least $500 million in severance to thousands of employees— fired in mass lay-offs when he acquired the social media company Twitter, now rebranded as X.

Ex-Twitter employees claim that one of the world's richest men, Musk, did not provide them with the appropriate severance packages, as promised under a severance plan outlined in 2019.

Instead, they claim they only received one month of severance pay without any benefits.

Court ruling

US District Judge Trina Thompson ruled on Tuesday (Jul9) that the claims brought by former Twitter employees did not fall under the federal Employee Retirement Income Security Act (Erisa), which governs benefit plans. She said that, as such, the court lacked jurisdiction to hear the case.

Judge Thompson determined that Erisa did not apply to the severance plan because it did not constitute an "ongoing administrative scheme" involving case-by-case review or additional benefits such as continued health insurance or outplacement services.

"There were only cash payments promised," she stated in her ruling.

The judge noted that the plaintiffs might amend their complaint to pursue claims not governed by Erisa.

Ongoing legal battles for Musk

The decision comes amidst multiple lawsuits Musk faces over his business practices at his companies— X, Tesla, and SpaceX— which include allegations of gender discrimination, defamation, and retaliatory firings.

Musk's lawyers were also involved in court proceedings this week over his contested multibillion-dollar compensation package as Tesla’s CEO. The court is set to decide whether the lawyers who successfully argued for the invalidation of Musk’s pay should receive $7 billion in legal fees, a record-breaking sum in US legal history.

(With inputs from agencies)