X, previously known as Twitter, must face a lawsuit from employees asking for a verbally promised $5 million in 2022, which the judge refused to dismiss on Friday.
Mark Schobinger, X's former senior director of compensation, filed a lawsuit in a San Francisco federal court seeking class-action status for 2,000 current and former X employees who didn't get their 2022 bonuses with damages exceeding $5 million. A federal judge recently found Schobinger's case plausible and allowed it to proceed, stating in a three-page opinion, "Twitter's offer to pay him a bonus in return became a binding contract under California law."
Breach of Contract
According to the lawsuit, the former Twitter CFO Ned Segal repeatedly assured Schobinger and other employees that they would receive 50% of their targeted bonus as per the company's bonus plan, which is based on the overall financial performance of the company if they stayed with the company until the first quarter of 2023. Despite Schobinger regularly getting job offers from recruiters, he declined them due to the promised payout. However, when the usual bonus payment period passed in March, no employees received any part of their promised bonus, and Schobinger filed the lawsuit for breach of contract in June.
Having disbanded its public relations team, X did not reply to CNN's request for comment, arguing that an oral promise shouldn't be binding and suggested the case should be heard in Texas. However, the judge stated that California law applies in contract enforcement matters. Since Elon Musk acquired the company and reduced its workforce by more than half, X has faced numerous lawsuits from former employees and executives. The claims include discrimination against older employees, women, and workers with disabilities, as well as failure to provide advance notice of mass layoffs, which X constantly denies.
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Before Musk acquired X, company executives assured employees multiple times that 2022 bonuses would be paid at 50% of the target, per the complaint. This promise continued even after Musk's acquisition. Despite the promises, X did not fulfill the commitment to pay out bonuses, as per the lawsuit, until Schobinger left the company in May, as stated in the complaint.
The June complaint mentioned that after Musk announced acquiring the social media company in April, many employees raised concerns about the future of their compensation and annual bonus when the deal closed.
Series of Legal Disputes
Schobinger's lawsuit is part of a series of legal disputes between X and its former employees, arising from Elon Musk's layoffs of thousands of Twitter staff shortly after taking over the company. Following November, over 2,200 arbitration cases were filed against X by employees claiming the new leadership didn't pay the promised severance. Some former employees have sued, highlighting a clause in the sale agreement with Musk that was meant to protect employees by ensuring comparable severance during the post-merger period. Another class action lawsuit, filed by ex-employees, alleges the company owes up to $500 million in unpaid severance for the nearly 5,000 laid-off staffers since November.
