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Judge Approves Lawsuit Against Elon Musk's X for Unpaid Salaries

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By Jerry Walters - - 5 Mins Read
Elon Musk photo, X profile page displayed on smartphone screen
Elon Musk X | Shutterstock

A federal judge recently greenlit a lawsuit against X, previously recognized as Twitter, centered on unpaid bonuses.


The lawsuit, initially filed in June by Mark Schobinger, the former head of compensation at the company, gained traction in alleging X's failure to compensate employees as promised.

Allegations of Unfulfilled Promises

The crux of the lawsuit revolves around the assertion that X, during the transition phase before and after Elon Musk's takeover, committed to disbursing annual bonuses to its workforce.


This verbal commitment, according to the plaintiff, was extended to all employees working at X by January 1, 2023, with the total owed amounting to over $5 million, affecting thousands of past and present employees.


In a statement attributed to Shannon Liss-Riordan, the attorney representing the plaintiff, the unpaid bonuses are estimated to reach "tens of millions of dollars."


Liss-Riordan further indicated that approximately "a couple thousand employees" were eligible for these bonuses.

Legal Back-and-Forth

Despite attempts by X's legal team to dismiss the case, Judge Vince Chhabria rejected their plea. The defence argued against upholding verbal agreements made by Schobinger with the former management, contending that the company couldn't be held accountable for such contracts. 


However, Judge Chhabria deemed Schobinger's case as valid, stating that it "plausibly stated a breach of contract claim" under California state law.


The lawsuit asserts that during Musk's acquisition of the company, Twitter's management assured employees they would receive 50% of their 2022 annual bonus if they stayed with the company.

Tesla CEO Elon Musk during the VIVATECH conference
Tesla CEO, Elon Musk | Shutterstock

Typically, these bonuses are distributed in the first quarter of the following year. However, as alleged in the lawsuit, these payments never materialized.


X's legal representatives contested the validity of this verbal agreement under Texas law, suggesting the case should be tried there.


Nevertheless, Judge Chhabria ruled that California law would govern the case and deemed all attempts at dismissal "failed," regardless of state-specific legal statutes.

Ramifications and Ongoing Legal Battles

Schobinger's departure from X in May, citing the company's failure to honor promises made to employees, including the non-payment of the 2022 bonuses, further shows the intensity of the dispute.


This recent legal ruling now compounds X's existing legal woes. The company has been grappling with multiple lawsuits in recent months, including disputes over missed rent payments and other services.


Additionally, former employees who were laid off or departed shortly following Musk's acquisition have also brought unsuccessful legal suits against the company.


The approval for this lawsuit to progress marks another episode in the legal saga surrounding X and adds to the mounting challenges faced by the company in addressing its past commitments and the aftermath of corporate changes.

The Impact on Elon Musk X Stock

This ongoing lawsuit and the wider legal challenges could potentially influence investor sentiment and the valuation of Elon Musk's X stock.


So, investors closely monitor such legal proceedings as they could impact the company's financial standing and corporate image, potentially reflecting in stock performance.


As the legal battle continues, the outcome remains uncertain, yet the implications for X and its stakeholders persist as they navigate through the repercussions of unresolved contractual commitments and legal disputes.


Elon Musk's X faces a difficult period, with legal battles casting shadows over the company's past decisions and commitments, ultimately shaping its future trajectory in the market.