Elon Musk violated employee contracts by stiffing workers at his social media company X out of millions of dollars worth of promised bonuses, according to a San Francisco federal judge.
US District Court Judge Vince Chhabria, who was appointed to the post by Barack Obama, allowed a lawsuit against the company formerly known as Twitter to proceed on Friday.
Mark Schobinger, who was Twitter’s senior director of compensation before leaving Musk’s company in May, filed a lawsuit against X in May alleging breach of contract.
Schobinger alleged in the lawsuit that senior company officials made verbal promises both before and after Musk acquired the platform for $44 billion last year that its employees would be paid 50% of their 2022 bonuses if they stayed with the firm through the first quarter of this year.
But the bonuses were never paid, it was alleged in the complaint.
Schobinger’s lawsuit was filed on behalf of himself as well as approximately 2,000 other current and former employees of X.
The plaintiffs are seeking in excess of $5 million.
In denying Twitter’s motion to dismiss the case, Chhabria ruled that Schobinger plausibly stated a breach of contract claim under California law and he was covered by a bonus plan.
“Once Schobinger did what Twitter asked, Twitter’s offer to pay him a bonus in return became a binding contract under California law. And by allegedly refusing to pay Schobinger his promised bonus, Twitter violated that contract,” the judge wrote.
Twitter’s lawyers argued that the company made only an oral promise that was not a contract, and that Texas law should govern the case, according to Courthouse News, which first reported the ruling.
The judge ruled that California law governed the case and that “Twitter’s contrary arguments all fail.”
The Post has sought comment from X.
Musk, the world’s richest man by virtue of the stake he owns in electric car maker Tesla, acquired what was then known as Twitter in the fall of last year.
The mogul ended up paying $44 billion for the social media platform even though it was valued at far below that figure.
To cut costs amid hemorrhaging cash flow and a steep drop in advertising, Musk laid off more than three-fourths of the staff that he inherited from the previous management.
Earlier this year, Musk hired former NBCUniversal advertising executive Linda Yaccarino in hopes of enticing advertisers back to the platform.
But Musk’s free-wheeling management style, his loose content moderation policies and his controversial posts have kept some blue-chip companies away.
The pro-Democrat pressure group Media Matters published a report which found that company ads on X were appearing alongside pro-Nazi content.
The company blasted Media Matters and filed a lawsuit claiming that it manipulated the site’s algorithm to make it appear as if the ads were placed next to racist content on purpose.
Musk last month told Disney CEO Bob Iger and other company executives who pulled ads from X over alleged antisemitism on the platform to “go f–k yourself.”
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