Elon Musk's X to Face Court Battle After Failing to Pay Staff Millions in Annual Bonuses

By Jace Dela Cruz

Dec 27, 2023 03:22 AM EST

A California federal judge has greenlighted the advancement of a lawsuit against Elon Musk's X, previously known as Twitter, which alleged the company's failure to fulfill commitments related to the annual bonuses of its workforce.

According to Business Insider, the lawsuit, filed in June by X's former head of compensation, Mark Schobinger, claimed that the company violated verbal agreements about paying all employees working as of January 1, 2023, a portion of their annual bonuses.

(Photo : KIRILL KUDRYAVTSEV/AFP via Getty Images)
A photo taken on November 17, 2023 shows the logo of US online social media and social networking service X - formerly Twitter - on a smartphone screen in Frankfurt am Main, western Germany

The Lawsuit Against Elon Musk's X

Shannon Liss-Riordan, the lawyer representing the plaintiff, told Business Insider that "a couple thousand employees" would have been eligible for the bonuses. The court filing said the total amount owed by X is over $5 million.

Judge Vince Chhabria dismissed X's plea to junk the case on Friday, as he rejected the company's argument that it could not be forced to honor verbal contracts between the former management and Schobinger.

However, the judge recognized the plausibility of Schobinger's breach of contract claim under California state law. He emphasized that once Schobinger did what the company asked, X's offer to "pay him a bonus in return became a binding contract under California law."

According to the judge, X's refusal to fulfill the promised bonus violated this contract.

Takeover of X by Elon Musk

The lawsuit argued that before Elon Musk's takeover of X in October 2022, Twitter's management assured employees a 50% payout of their 2022 annual bonus if they remained with the company.

According to Forbes, the annual bonuses are normally being paid in the first quarter of the following year, but Schobinger said those payments never happened.

The legal team representing X noted that the case should be tried in Texas, where a verbal contract remains invalid. However, the judge ruled that the case would proceed under California law and junked all claims by X's lawyers for dismissal of the case.

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