Elon Musk-Owned X Faces A Lawsuit Over Non Payment Of Annual Bonuses

Elon Musk-owned X (formerly Twitter) has been catching flak lately for failing to pay its employees the bonuses that the company allegedly promised them verbally.

Last week, a federal judge allowed a lawsuit against X to move ahead. It is worth noting that the lawsuit was originally filed in June by X's former head of compensation Mark Schobinger.

Schobinger filed the class action suit on behalf of himself and a slew of other current and former X employees.

The lawsuit accuses the Musk-led social media platform of not paying employees a portion of their bonuses, despite repeated promises from the company's top executives.

In other words, X has been sued for failing to honour verbal promises. Reportedly, the company promised that all employees working at X as of January 1, 2023, would receive a portion of their annual bonuses.

As per the court filing, the total amount owed is more than $5 million (about £3.93 million). Meanwhile, the plaintiff's attorney Shannon Liss-Riordan shared a statement with Business Insider, claiming the unpaid bonuses amounted to "tens of millions of dollars".

"We estimate about a couple thousand employees would have been eligible for the bonuses," she added.

A federal judge allows the case to proceed

On Friday, Judge Vince Chhabria denied X's lawyers' request to dismiss the case, which was their attempt to ensure X does not have to stand trial.

According to X's lawyers, Schobinger can't force the company to uphold verbal contracts between him and the former management. However, the judge argued that Schobinger's case "plausibly stated a breach of contract claim" under California state law.

"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 noted.

The lawsuit also states that the Twitter management told employees they would be paid 50 per cent of their 2022 annual bonus, provided they did not resign during Musk's takeover. Rubbing salt into the wound, Musk fired Twitter's top executives after acquiring the company in October 2022.

According to a Forbes report, companies usually pay annual bonuses in the first quarter of the following year. However, Schobinger insists those payments never happened.

X's lawyers suggest the verbal contract isn't valid under Texas law, where they believe the case should be tried. The judge, on the other hand, said the case would be governed by California law and their claims for dismissal were denied.

Schobinger, who quit in May, said X failed to honour multiple promises it made to employees, including its promise to pay the 2022 bonuses, per the complaint.

X has been facing a lot of lawsuits over missed payments lately. For instance, Musk allegedly stopped paying millions in rent at the San Francisco headquarters back in January. Chhabria's ruling added another lawsuit to the company's skyrocketing legal troubles.