A federal judge has allowed a lawsuit against X, formerly known as Twitter, to proceed, filed by Mark Schobinger, the company’s former head of compensation, on behalf of himself and numerous current and former employees.
The lawsuit alleges that X failed to fulfill promises of annual bonuses to employees working as of January 1, 2023. The total amount owed is claimed to exceed $5 million, with the plaintiff’s attorney estimating that “tens of millions of dollars” in bonuses are owed to a couple of thousand eligible employees.
In a statement shared with Business Insider, the plaintiff’s attorney, Shannon Liss-Riordan, said the bonuses owed amounted to “tens of millions of dollars.”
“We estimate about a couple thousand employees would have been eligible for the bonuses,” she added.
The legal dispute centers on verbal promises made by X’s management that employees would receive 50% of their 2022 annual bonus if they stayed with the company during Elon Musk’s takeover, finalized in October 2022. Typically paid in the first quarter of the following year, these promised bonuses were allegedly never disbursed, leading to the breach of contract claims.
X’s lawyers argued that the case should be tried under Texas law, claiming the verbal contract did not hold up. However, Judge Vince Chhabria ruled that the case would be governed by California law, and dismissed calls from X’s lawyers to throw out the case.
The judge stated that Schobinger’s case “plausibly stated a breach of contract claim” under California state law, emphasizing that once Schobinger fulfilled Twitter’s request, a binding contract was established. By allegedly failing to pay the promised bonus, X was found to have violated that contract.
“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 said.
This legal setback adds to X’s mounting legal troubles, as the company has faced various lawsuits in recent months, including issues related to missed payments on rent and other services. Additionally, there have been unsuccessful suits from employees who were laid off or resigned shortly after Musk’s takeover. The current lawsuit, which now has the judicial green light to proceed, seeks to recover substantial amounts in unpaid bonuses and raises further questions about the company’s financial and management practices.